DTE Energy sells $25-par debt at 5.25%; Gabelli Equity Trust's 5% preferreds trade above par

By Stephanie N. Rotondo

Phoenix, Sept. 25 - More and more new issues were coming into the preferred market Tuesday, and a trader said he heard the pace is not going to let up anytime soon.

However, he was surprised that there wasn't generally more activity in the preferred realm given that the end of the month and quarter are just days away.

"Nothing is really shaking," he said.

DTE Energy Co., a Detroit-based utility, said it was going to issue at least $150 million of $25-par 2012 series C junior subordinated debentures due 2062. The company ended up selling $200 million of the debentures, which were priced at the tight end of talk.

Meanwhile, Gabelli Equity Trust Inc. brought $105 million of 5% series H cumulative perpetual preferred stock. Like DTE, the deal came at the tight end of talk, and it was upsized from $50 million.

Also, ArcelorMittal SA priced a $650 million offering of 8.25% $100-par capital securities. That deal was coming off by the end of the day.

DTE brings $25-par debt

DTE Energy announced and then priced a $200 million issue of 5.25% $25-par 2012 series C junior subordinated debentures due 2062 on Tuesday.

Price talk was 5.25% to 5.375%, according to a trader.

Ahead of pricing, the issue was already trading at $24.95 in the gray market, he added.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunning managers. The co-managers are BNY Mellon Capital Markets LLC, Comerica Securities, Inc., Deutsche Bank Securities Inc. and Mitsubishi UFJ Securities (USA), Inc.

Proceeds will be used to pay a portion of the purchase price for a portfolio of onsite energy projects, to repay short-term borrowings and for general corporate purposes.

Gabelli moves above par

Gabelli Equity Trust's new $105 million of 5% series H cumulative redeemable preferreds were trading above par post-pricing, according to a trader. He saw the paper offered at $25.05.

Bank of America Merrill Lynch is the bookrunner.

Proceeds will be used to redeem the company's 6.2% series F cumulative preferreds. Any remaining funds could be used for further preferred redemptions.

The series F preferreds (NYSE: GABPF) continued to feel weak, falling 4 cents to $25.46.

Gabelli is a non-diversified, closed-end management investment company based in Rye, N.Y.

Arcelor's new hybrid falls

Luxembourg-based mining and steel company ArcelorMittal priced $650 million of 8.25% $100-par subordinated perpetual capital securities (provisional Ba2//BB(exp)) on Tuesday via a Rule 144A offering.

The issue priced at par but was seen offered in a 99.625 to 99.75 range, according to a trader.

"That company has had its own woes," the trader said.

The hybrid issuance is being touted as an effort by the company to boost its credit rating, as only half of the principal would be considered debt by rating agencies. Agencies have already been reviewing the company's ratings due to weak steel demand. The decline in demand has raised questions about whether or not the company's cash flows can keep up with its debt obligations.

The coupon will reset every five years. The second increase will increase the interest rate by 25 basis points, and then it will increase by 75 bps 15 years later.

The company can call the issue after five years, again after another five years and then on subsequent interest payment dates. Additionally, ArcelorMittal can call the paper in the event of certain accounting, tax, rating agency or change-of-control scenarios.

Settlement is expected Friday.

Citigroup, HSBC Securities (USA) Inc., RBS Securities Inc. and BNP Paribas Securities Corp. are the lead managers.

PNC listing Wednesday

PNC Financial Services Group Inc.'s recent 5.375% series Q noncumulative perpetual preferred stock is expected to list on the New York Stock Exchange on Wednesday.

The $450 million deal priced Sept. 14. The ticker symbol is "PNCPQ."

A trader quoted the issue at $24.87 bid, $24.90 offered.

PNC is a Pittsburgh-based financial services firm.

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