Preferreds gain with common equities; DTE prices $280 million $25-par notes; Financials mixed

By Stephanie N. Rotondo

Portland, Ore., Nov. 28 - Preferred stocks were on the rise Monday as investors returned from the long holiday weekend.

Still, volume was "unusually light," a market source said.

The primary market saw some action as DTE Energy Co. brought a new issue of $25-par 50-year junior subordinated notes. The company announced the deal early on in the session, and it priced later in the day as a $280 million issue of 6.5% notes.

Price talk was originally in a 6.625% to 6.75% range but was later revised.

Meanwhile, financials continued to dominate the secondary market, but there was no real trend. Ally Financial Inc., for example, ended lower, while Bank of America Corp.'s structure was mixed.

DTE brings upsized issue

Detroit-based energy provider DTE Energy priced a $280 million issue of 6.5% 2011 series $25-par junior subordinated debentures due 2061 on Monday, according to a market source.

Price talk was 6.625% to 6.75% but was revised to 6.5% to 6.625%, a trader said. Fitch Ratings assigned a BB+ rating to the debentures. The remaining ratings are expected to be Baa3/BBB-.

The deal was upsized from $150 million.

Market sources saw the deal doing quite well in the grey market. One trader quoted the new issue at $24.90 bid, $24.93 offered shortly before the market closed. After the bell, another source pegged the notes at $24.92 bid, par offered.

The second source remarked that non-financial issuers bring an interesting "supply and demand dynamic" because "there's really not a lot of that available."

"The fact that you can have [an issue] offered at $25 in the grey [market] is pretty good," he concluded.

Interest is payable quarterly, the company said in a prospectus filed with the Securities and Exchange Commission on Monday.

The interest payments can be deferred for up to 20 consecutive quarters. Additionally, the notes can be redeemed at the company's option on or after Dec. 1, 2016 or before that date in the event of certain changes in tax laws or following a rating agency event.

Proceeds will be used to redeem some or all of DTE's trust preferred-linked securities.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunning managers. Huntington Investment Co., Mitsubishi UFJ Securities (USA) Inc. and SunTrust Robinson Humphrey Inc. are the co-managers.

DTE intends to list the notes on the New York Stock Exchange.

Financials end mixed

Financials were the busiest trading issues of the day, though there was no clear trend.

Ally Financial's 8.5% series B preferreds (NYSE: ALLYPB) dropped 23 cents, or 1.32%, to $17.19.

In the Bank of America complex, the 8.2% series H depositary shares (NYSE: BACPH) closed up 2 cents at $22.31, while the 8.625% series 8 noncumulative preferreds (NYSE: BMLPQ) lost 3 cents, closing at $22.09. The floating-rate series 2 noncumulative preferreds (NYSE: BMLPH) were the day's biggest percentage gainer, moving up 91 cents, or 6.01%, to $16.05.

Among foreign issuers, HSBC Holdings plc's 8% exchangeable perpetual subordinated capital securities (NYSE: HCSPB) moved up 26 cents, or 1.02%, to $25.81, and Deutsche Bank AG's 8.05% trust preferreds (NYSE: DKT) rose 68 cents, or 2.93%, to $23.92.

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