Ares selling preferred units; Reinsurance Group prices subordinated debentures; DTE lists

By Stephanie N. Rotondo

Seattle, June 1 – The first day of the month saw two new issues entering the preferred stock market.

Ares Management LP said it planned to price at least $150 million of series A preferred units.

Price talk is 7% to 7.125%, according to a market source.

Morgan Stanley & Co. LLC, BofA Merrill Lynch and Wells Fargo Securities LLC are running the deal.

Pricing details were not available at press time, though one market source said $275 million of the preferred units were sold.

Proceeds will be used to fund Ares Capital Corp.’s planned merger with American Capital Ltd.

Reinsurance Group of America Inc. also announced a deal, an offering of $25-par fixed-to-floating rate subordinated debentures due 2056.

The deal came at 5.75%, with $400 million of the debentures being sold. The coupon starts to float on June 15, 2026 at Libor plus 404 basis points.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Wells Fargo and HSBC are the joint bookrunners.

Proceeds will be used to pay off an upcoming maturity.

After the bell, a market source gave a gray market quote of $24.55 bid, $24.65 offered for the Ares deal. The Reinsurance issue was pegged at $25.10 bid, no offer in the gray.

“Talk about a big difference in deal quality,” the source said.

From Monday’s business, NextEra Energy Capital Holdings Inc.’s $500 million of 5.25% $25-par series K junior subordinated debentures due 2076 had not freed as of mid-morning, according to a trader.

The trader pegged the issue at $24.78 bid, $24.82 offered.

The deal came upsized via BofA Merrill Lynch, Morgan Stanley, UBS Securities LLC and Wells Fargo.

In new listings, DTE Energy Co.’s $300 million of 5.375% $25-par 2016 series B junior subordinated debentures due 2076 began trading on the New York Stock Exchange on Wednesday.

The ticker is “DTJ.” The deal priced May 23 via BofA Merrill Lynch, UBS and Wells Fargo.

The notes were seen closing at $24.90, down from opening levels of $24.93.

A trader pegged the issue at $24.80 bid, $24.84 offered early in the session.

Away from new and recent issues, a trader said it was on the muted side.

“There’s not a lot of movement in the secondary,” he said. “Hopefully this primary market stays pretty active.”

Fannie, Freddie soften

Fannie Mae and Freddie Mac preferreds continued to be actively traded Wednesday, though the securities gave up some of the ground earned of late.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were off 6 cents, or 1.28%, at $4.62. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) came in a penny to close at $4.45.

The GSEs’ preferreds have run up recently, as newly unsealed documents seem to support creditor lawsuits alleging that the government’s takeover of a majority of the agencies profits was unlawful.

Judge Margaret Sweeney of the U.S. Court of Federal Claims has asserted that she wants to review all documents the government has been trying to keep sealed in regards to the Treasury’s “net worth sweep” of the agencies’ profits. In recent weeks, Sweeney has unsealed a number of documents that appear to show that the Treasury and the White House worked together more than previously reported in rationalizing the government’s takeover of a majority of Fannie and Freddie’s profits.

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