Duke Energy prices $25-par notes; Homeowners Choice plans offering; trading volume rises

By Andrea Heisinger and Stephanie N. Rotondo

New York, Jan. 9 - There wasn't much in the way of excitement in the preferred stock market Wednesday, but talk of a "possible utility" deal on Tuesday came to fruition as Duke Energy Corp. announced plans to sell at least $200 million of $25-par junior subordinated debentures due 2073.

Price talk for the Duke notes was originally 5.25% to 5.375%, according to a trader. It was then revised to around 5.125%.

"It's going pretty well," a trader said at midday. "There have been strong bids the entire time, even with the revised price talk."

He said the issue was trading in a range of $24.95 to par in the midday gray market.

By early afternoon the issue had "moved up to $25.10 bid," a trader said. "It's launched, the books are closed. It should price after the close."

The Duke notes, which climbed to $500 million, priced ahead of the market close and were seen "actually trading pretty strong" at a bid of $25.30, a trader said.

Overall, the market was generally up for most of the day, with issues boosted 1.5 cents a share, the trader said.

"The volume levels are the most activity we've seen, at least this week," he added.

The primary preferred space was "busy," the trader said, noting that a "preemie" deal from Homeowners Choice Inc. was also circulating.

The trader said he expected the sale of the $25-par senior notes due 2020 would be a couple million shares at best, adding that price talk was around 8%.

However, he had not seen any markets for the new issue. As of the market close, the sale was not seen pricing.

Meanwhile, TravelCenters of America LLC's new $100 million of 8.25% $25-par senior notes due 2028 - a deal that priced Tuesday - was "holding in" at less 28 bid, less 23 offered, according to a trader at midday.

Earlier in the session, he saw a $24.60 bid for the paper, which he assumed was a manager bid. "Somebody hit a less 28 bid" after that, he said, but overall, trading in the securities was quiet.

But Public Storage's new $450 million issue of 5.2% series W cumulative redeemable perpetual preferreds were "still spinning around," trading "locked" at $24.90 as of early afternoon in the New York session.

That issue priced Monday and freed to trade on Tuesday.

An outstanding issue of Duke Energy series A preferreds was seen topping trading volume with 2.22 million shares changing hands, a market source said. The shares were trading flat at $25.35, and a call had been announced on them, the source said.

Other issues seen trading at high volume on the day were from General Electric Co., the Royal Bank of Scotland and Wells Fargo & Co.

Duke's $25-par sale

Duke Energy priced $500 million of 5.125% $25-par junior subordinated debentures due Jan. 15, 2073, according to an FWP filing with the Securities and Exchange Commission.

Price talk was originally 5.25% to 5.375%, according to a trader. It was then revised to around 5.125% with the notes pricing in line with that level.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunners. J.P. Morgan Securities LLC and RBC Capital Markets LLC are the co-managers.

Interest will be payable on the 15th day of January, April, July and October, beginning April 15. The company has the right to defer interest payments for up to 40 consecutive quarters, assuming there is no event of default.

The notes are callable before Jan. 15, 2018 at par plus accrued interest and a make-whole premium of Treasuries plus 30 basis points. After that date, the notes are callable at par plus accrued interest.

Additionally, the notes are redeemable before 2018 in whole, but not in part, within 90 days of a tax or rating agency event. The call price is par plus accrued interest.

Duke Energy intends to list the notes on the New York Stock Exchange under the ticker symbol "DUKH."

Proceeds will be used to help fund the redemption of $300 million of 7.1% junior subordinated deferrable interest notes due 2039, which were issued by a subsidiary, Florida Progress Funding Corp. Any remaining funds will be used to repay commercial paper as it matures, to fund capital expenditures of unregulated businesses and for general corporate purposes.

The diversified energy company is based in Charlotte, N.C.

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