DTE Energy's recent issue lists on NYSE; First Niagara deal frees to trade; financials sink

By Stephanie N. Rotondo

Portland, Ore., Dec. 8 - The primary market was where the real action was in Thursday's preferred stock market, according to markets sources.

DTE Energy Co.'s recent issue of 6.5% junior subordinated notes due 2061 was the day's most actively traded issue, a market source said. The deal officially listed on the New York Stock Exchange on Thursday as well.

Meanwhile, First Niagara Financial Group Inc.'s $350 million issue of fixed-to-floating series B preferreds was also trading busily. The issue freed to trade during the session and "took off this morning in the gray market," a source said. However, it came back in somewhat by the end of business.

The secondary realm was meantime generally weaker - and rather subdued - as investors reacted to the release of another round of stress tests in Europe. Out of 71 banks tested, 31 were shown to need more capital to bolster reserves. Still, the news was classified as "kind of a non-event.

"It does go to show some guys did improve, some did a little worse," the source said. "Now they have seven months to figure out what they are doing."

DTE new issue lists

DTE Energy's recent issue of 6.5% junior subordinated notes due 2061 officially listed, market sources reported.

The ticker symbol is "DTZ."

Shortly before the close, a trader placed the issue at $25.55. At the end of the day, a source called the issue "essentially flat" at $25.61.

The notes traded as high as $25.76.

The Detroit-based energy provider priced the deal on Nov. 28. The next day, the company said it was using proceeds from the new issue to redeem its 7.8% (NYSE: DTEPA) and 7.5% (NYSE: DTEPC) trust preferreds.

The redemption price is par plus unpaid and accrued dividends through Dec. 29.

In other recent deals, Aviva plc's $400 million issue of 8.25% capital securities due 2041 (NYSE: AVV) rose by 6 cents to $24.58.

First Niagara frees up

First Niagara Financial's $350 million issue of 8.625% fixed-to-floating series B preferreds freed to trade during Thursday's session.

"It did very well," a market source said. "It took off this morning in the gray market."

By mid-afternoon, however, the issue was "backing off."

The source saw the issue hitting a high of $25.40 before coming back to end at $25.20 offered.

"It was pretty active," he added.

"It's a strong deal," said another trader.

The issue from the Buffalo, N.Y.-based regional bank priced late Wednesday. The rate is fixed at 8.625% for five years, at which time the rate will be based on three-month LIBOR plus a spread of 732.7 basis points.

The deal was originally slated to be $250 million, but due to high demand it was upped to $350 million. A source said that he heard demand was $450 million to $475 million and so pricing was "reined in" to 8.625% from 8.75%.

Additionally, the company cancelled a $37.5 million over-allotment option.

First Niagara can call the issue (Baa2/BB+/B+) on any dividend date starting Feb. 15, 2017 at par plus any declared and unpaid dividends.

Settlement is expected on Dec. 14.

Goldman Sachs & Co. is the global coordinator for the offering and Merrill Lynch, Pierce, Fenner & Smith Inc. is physical bookrunner. Goldman Sachs, Merrill Lynch and Wells Fargo Securities, LLC are the joint bookrunning managers. Citigroup Global Markets Inc. is the joint lead manager, and Sandler O'Neill + Partners, L.P. is co-manager.

Proceeds will be used to complete the Buffalo, N.Y.-based bank's acquisition of branches of HSBC Bank USA, NA, which was announced July 31.

Financials sink

In the secondary space, Citigroup Inc.'s 8.5% fixed-to-floating rate trust preferreds (NYSE: CPJ) fell 2 cents to $25.14.

Bank of America Corp.'s Merrill Lynch-linked 8.625% noncumulative preferreds (NYSE: BMLPQ) meanwhile dropped 31 cents, or 1.36%, to $22.52.

And, Barclays Bank Plc's 8.125% noncumulative callable dollar preference shares (NYSE: BCSPD) lost a quarter, or 1.07%, to $23.05.

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