Morning Commentary: Preferreds muted, softer in post-holiday trades; DTE to sell $25-par debentures

By Stephanie N. Rotondo

Seattle, Nov. 28 – The preferred stock market was starting the post-holiday week on the subdued side, according to one trader.

“Everybody’s just coming in and getting their bearings” after the long Thanksgiving weekend, the trader said.

The market was also kicking off with a weaker tone, as the Wells Fargo Hybrid and Preferred Securities index softened by 17 basis points at mid-morning.

Despite the weaker tone, the new issue market was showing signs of life.

DTE Energy Co. announced plans to sell $25-par 2016 series F junior subordinated debentures due Dec. 1, 2076 via BofA Merrill Lynch, J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities LLC.

Price talk is 6% to 6.125%, according to a market source.

A trader saw the issue at $24.75 bid in the early gray market.

The debentures become redeemable on or after Dec. 1, 2021 at par plus accrued interest. The notes can be redeemed prior to that date, in whole, in the event of a tax change or rating agency event.

Upon a tax event, the redemption price is par plus accrued interest. In the case of a rating agency event, the price is 102% of par plus accrued interest.

The Detroit-based power producer will use the proceeds to redeem $280 million of the outstanding 2011 series I 6.5% junior subordinated debentures due 2061 (NYSE: DTZ). In the wake of that news, the 6.5% notes were off 12 cents at $25.04.

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