Southern California Edison deal prices, frees; DuPont Fabros plans add-on to 7.625% preferreds

By Stephanie N. Rotondo

Portland, Ore., Jan. 12 - Preferred stocks were better Thursday, "but for the amount the market was up, it was on lighter volume," a market source said.

The primary market continued to churn out new deals during the session. Southern California Edison Co. priced a $250 million issue of fixed-to-floating-rate $1,000-par series E cumulative preference stock at 6.25%. The deal also freed to trade and was seen trading at par or above.

DuPont Fabros Technology, Inc. meantime said it will bring an add-on to its 7.625% series B cumulative redeemable perpetual preferreds, and Hospitality Properties Trust Co. announced plans to sell series D cumulative redeemable preferreds.

The latter issue was talked at 7.125% to 7.25% and is expected to price Friday.

Among other recent deals, Public Storage's $400 million issue of 5.9% series S cumulative preferreds officially listed on the New York Stock Exchange. The deal priced a week ago.

In the secondary arena, Royal Bank of Scotland Group plc continued to be active and better after the Edinburgh-based bank announced a restructuring plan that would cut thousands of jobs and shutter unprofitable units.

ING Groep NV, however, was mixed on the day after the company scrapped plans for an initial public offering of its insurance unit.

SoCal Edison frees, hits par

Southern California Edison issued $250 million of $1,000-par fixed-to-floating-rate series E cumulative perpetual preference stock, with initial dividends set at 6.25%, according to an FWP filed with the Securities and Exchange Commission on Thursday.

The deal came in line with price talk.

A market source said the deal freed from the syndicate and that it was trading above par right away.

"It kind of took off once it freed to trade," he said. "It has traded well."

He said he last saw the issue trading at 1003/4.

Dividends will be fixed until Feb. 1, 2022 and will then become Libor plus 419.9 basis points.

Dividends will be payable semiannually when declared by the board of directors until Feb. 1, 2022. After that, dividends will be payable quarterly.

Additionally, the company can redeem the shares after Feb. 1, 2022 at par plus accrued dividends.

There is no stated maturity or sinking fund clause nor any mandatory redemption features.

Expected ratings are Baa2/BBB-/BBB+.

Settlement is expected Jan. 17.

Barclays Capital Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Williams Capital Group LP are the joint bookrunning managers. CastleOak Securities, LP, MFR Securities, Inc., Samuel A. Ramirez & Co., Inc. and SL Hare Capital, Inc. are the co-managers.

Proceeds will be used to either repay commercial paper borrowings or for general corporate purposes.

The Rosemead, Calif.-based power company has no plans to list the preferreds on any exchange.

DuPont heralds add-on

DuPont Fabros said in a regulatory filing that it will reopen its 7.625% series B cumulative redeemable perpetual preferreds.

The existing paper (NYSE: DFTPB) closed down 30 cents, or 1.19%, at $24.95.

The liquidation preference is $25.00 per preferred. The reoffer price is also $25.00, according to a trader.

The company expects to grant the underwriters a 15% 30-day over-allotment option.

The company currently pays dividends on the 15th day of January, April, July and October. The first dividend payment for the reopening will occur April 16.

The preferreds are not redeemable until March 15, 2016, except in certain circumstances. There is a change-of-control feature.

Barclays Capital, Raymond James & Associates Inc., Jefferies & Co. and Stifel, Nicolaus & Co. Inc. are the joint bookrunners. KeyBanc Capital Markets LLC is the co-manager.

Proceeds will be used to repay outstanding borrowings under the company's $100 million revolving credit facility and for corporate purposes.

DuPont Fabros is a Washington, D.C.-based real estate investment trust.

Hospitality Properties to price

Another REIT, Hospitality Properties Trust, also announced a deal Thursday.

The Newton, Mass.-based company said in a regulatory filing that it will sell series D cumulative redeemable preferreds.

Price talk is 7.125% to 7.25%, according to a trader. Pricing is expected Friday.

In the gray market, a market saw the securities trading between $24.70 and $24.80.

"It looks like it is going to be a strong deal," another trader said.

The company is not allowed to redeem the preferreds until Jan. 15, 2017. After that time, the company has the option to redeem them, in whole or in part, at par plus accrued dividends.

There is also a change-of-control feature that allows preferred holders to convert the holdings into common equity.

Wells Fargo Securities LLC, Citigroup Global Markets Inc., Morgan Stanley, RBC Capital Markets LLC and UBS Securities LLC are the joint bookrunning managers. Morgan Keegan & Co. Inc. and BB&T Capital Markets are the co-managers.

Proceeds will be used to reduce amounts outstanding under the company's revolving credit facility and for general corporate purposes, which may include acquisitions or the redemption of the series B preferreds.

Public Storage lists

Public Storage's recent $400 million issue of 5.9% series S cumulative preferreds officially listed on the New York Stock Exchange, a trader reported.

The ticker symbol is "PSAPS." The preferreds closed down 6 cents at $24.94.

The Glendale, Calif.-based REIT will use proceeds from the recent sale to take out its series O preferreds.

In other recent deals, PS Business Parks Inc.'s 6.45% series S cumulative redeemable perpetual preferreds were coming down a bit, according to market sources.

One pegged the issue at $24.95 shortly before the market closed. Another saw the paper at $24.93 at the close.

"It opened at par and quickly fell," he said. "There were only a couple of trades where it was trading at or above par."

The issue priced Tuesday.

RBS lauds plan, shares rise

Royal Bank of Scotland preferreds continued to improve as the bank announced a restructuring plan that included cutting 4,800 jobs and the selling or closure of its cash equities, mergers advisory, corporate broking and equity capital markets operations.

RBS said it is in talks with potential buyers of the units.

"It certainly was viewed as an overall positive," a market source said of the plan.

The news resulted in active trading for RBS securities, which were also the biggest percentage gainers of the day.

The most actively traded issues were the 6.75% series Q noncumulative dollar preference shares (NYSE: RBSPQ), the 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) and the 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG).

The Qs rose 83 cents, or 5.68%, to $15.43, while the Ts moved up 59 cents, or 3.77%, to $16.24. The trust preferreds meantime increased 49 cents, or 4.33%, to $11.80.

Of the issues trading with reasonable volume, the 6.25% series P noncumulative dollar preference shares (NYSE: RBSPP) gained the most, climbing up 82 cents, or 5.99%, to $14.50.

"We are pulling out of business areas that are unprofitable and where we have weaker customer positions than the market leading group of competitors," Stephen Hester, chief executive officer, wrote in a memo sent to employees. "We are also scaling back resources in areas where market developments threaten our ability to fund ourselves sustainably and profitably."

ING mixed, IPO nixed

While RBS was on the rise, ING was trading in mixed fashion after the Dutch financial services company canceled plans for an IPO for its European and Asian insurance and investment units.

ING said its decision was based upon economic uncertainty. Instead, the company is looking into other options, including selling the units outright.

The 8.5% perpetual hybrid capital securities (NYSE: IGK) were the most active of the ING issues and were down a penny at $23.87. A market source said that was notable given that the majority of the preferred market was higher.

But the 7.375% perpetual hybrid capital securities (NYSE: IDG) ended firmer, gaining 7 cents to close at $20.52.

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