Preferred stocks sink as week ends; Solar Capital doing well; Public Storage heralds call

By Stephanie N. Rotondo

Phoenix, Nov. 9 - Preferred stocks were still soft as the week was winding down, though overall volume was "not much," according to a trader.

"There's some softness to the market in newer listed stuff," he said, noting specifically Apollo Investment Corp.'s $150 million of 6.625% $25-par senior notes due 2042, which listed on the New York Stock Exchange on Thursday.

He said the issue had "broke through" $24.50 and was trading as low as $24.25.

The notes (NYSE: AIB) were down 10 cents to $24.35.

Another market source remarked that overall volume was "generally down, on the low side of average."

In new deals, Solar Capital Ltd.'s $100 million of 6.75% $25-par senior notes due 2042 were doing reasonably well, despite one trader's belief that the deal left something to be desired.

Meanwhile, investors were little moved by word that Public Storage intended to redeem three series of its preferreds.

The company announced the call late Thursday. The real estate investment trust also reported third-quarter results during that session, showing a 34% increase in funds from operations.

Solar Capital outperforms

Solar Capital's new 6.75% $25-par senior notes due 2042 were doing better than some had expected on Friday.

The deal priced Thursday, coming upsized from an expected $75 million and in line with price talk.

On Friday, a trader quoted the issue at $24.70 bid, $24.75 offered.

As previously reported, the deal had its detractors.

"Nobody was allowed in; there's no selling group, no syndicate," a trader remarked prior to pricing on Thursday.

He noted that the company had done a private placement in May of a 5.875% seven-year secured bond.

"An unsecured 30-year senior note for this tiny little company at 6.75% didn't look incredibly attractive to me," he said. "I don't think a lot of people will be playing in it."

Joint bookrunners are Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, Wells Fargo Securities LLC, Deutsche Bank Securities Inc. and RBC Capital Markets LLC.

Proceeds will be used to pay down debt and for general corporate purposes.

Public Storage calls debt

Public Storage will call the 6.25% series Z cumulative preferreds, the 6.125% series A cumulative preferreds and the 6.18% series D preferreds on Dec. 27.

The Zs (NYSE: PSAPZ) were unchanged at $25.58, as where the Ds (NYSE: PSAPD), which were seen at $25.52. The As (NYSE: PSAPA) were down 6 cents at $25.45 at midafternoon but moved up later to close at $25.57.

The issues will be redeemed at par plus accrued dividends.

Also on Thursday, the Glendale, Calif.-based real estate investment trust reported its third quarter results, which showed net income of $202.5 million, or $1.18 per share. That compared to a profit of $118 million, or 69 cents per share, the year before.

The improved figures were attributed in part to "reduced allocations of income to our preferred shareholders due primarily to lower average coupon rates and lower average outstanding preferred shares," according to the earnings release.

Fed, FDIC delay Basel start

A market source said that the preferred stock arena was digesting a statement made by the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency regarding the implementation of new proposed rules established in Basel III.

The agencies said Friday that it would not adhere to a Jan. 1 deadline for instituting said rules, which have to do with the amount of reserves a bank must have on hand in order to stem potential losses. The agencies said they were doing so in order to allow them more time to review the 2,000-plus comments received on the proposed rules.

But the source said that while some were taking the statement at face value, others were speculating that the agencies want more time to look into how fair the rules are to smaller banks and particularly how it would pertain to those banks' trust preferred securities.

Under the new rules, certain trust preferreds would not be considered Tier I capital. The market has already seen a number of larger banks attempting to get ahead of that situation by issuing new noncumulative perpetual preferreds in order to redeem its outstanding trust preferreds.

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