Hartford's new issue rebounds; Aspen Insurance active, steady; MFA frees, still lacks momentum

By Stephanie N. Rotondo

Portland, Ore., April 5 - It was a lackluster day for preferred stocks Thursday. Many players were gone or left early to get a head start on the three-day holiday weekend.

And with "not a lot of news" to drive anything one way or another, a market source called the day "flat overall."

Recent deals were again moderately active. Hartford Financial Services Group, Inc.'s $600 million issue of 7.875% $25-par fixed-to-floating junior debentures due 2042 regained the ground lost on Wednesday. Aspen Insurance Holdings Ltd.'s new 7.25% $25-par perpetual noncumulative preference shares were meantime "pretty active," a trader said.

MFA Financial Inc.'s recent $100 million of 8% $25-par senior notes due 2042 were holding steady at recent levels, but they were not able to gain momentum despite freeing to trade Thursday.

In the secondary realm, Royal Bank of Scotland Group plc continued to take the lion's share of investor focus. Two of the bank's issues made the day's top five most active list, with one trading up and the other down. That left one source to speculate that a single investor was making a swap.

Hartford rebounds

Hartford Financial Services Group's new 7.875% fixed-to-floating rate $25-par junior subordinated debentures due April 15, 2042 - a deal that priced Tuesday - were "trading well," a trader said.

When the deal was first announced Monday, it was expected that the company would issue $500 million of notes. Ahead of pricing, the paper was already trading at levels at par or above. After pricing and freeing to trade, the notes were going "gangbusters," a source reported Tuesday.

On Thursday, the trader saw the notes regain the ground lost in the previous session, pegging the paper in the $25.65 area.

Another market source saw the notes trading in a range between $25.50 and $26.20 and said the volume-weighted average price was $25.69.

The interest rate will be fixed until April 15, 2022. It will then be Libor plus 559.6 basis points. The floating rate will be reset quarterly.

Hartford will apply to list the notes on the New York Stock Exchange.

Citigroup Global Markets Inc. and Goldman Sachs & Co. are the joint structuring advisers and bookrunning managers. Bank of America Merrill Lynch, Barclays Capital Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC are also acting as joint bookrunners. Credit Suisse Securities (USA) LLC, UBS Securities LLC, U.S. Bancorp Investments, Inc. and Wells Fargo Securities, LLC are senior co-managers. BB&T Capital Markets, BNY Mellon Capital Markets, LLC, Lloyds Securities Inc., PNC Capital Markets LLC, RBS Securities Inc., SMBC Nikko Capital Markets Ltd. and Williams Capital Group, LP are junior co-managers.

Proceeds from the sale will be used toward a planned repurchase of 10% fixed-to-floating-rate junior subordinated debentures due 2068.

Hartford Financial is an insurance and financial services company based in Hartford, Conn.

Aspen deal active

Aspen Insurance Holdings' 7.25% $25-par perpetual noncumulative preference shares were "pretty active," according to a trader.

He placed the preference shares at $25.75, down slightly from the day before.

But another source saw the securities holding in at $24.80 bid, $24.875 offered. He added that most trades occurred between $24.75 and $24.80.

Aspen Insurance will apply to list the preference shares on the New York Stock Exchange under the ticker symbol "AHLPB." Settlement is expected Wednesday.

Citigroup, Barclays, UBS and Wells Fargo are the joint bookrunning managers. BNY Mellon, Credit Agricole Securities (USA) Inc., Deutsche Bank, HSBC Securities (USA) Inc. and U.S. Bancorp are co-managers.

Proceeds will be used for general corporate purposes, including supporting insurance and reinsurance activities through operating subsidiaries, and for repurchasing ordinary shares from time to time.

Aspen Insurance is an insurance and reinsurance company based in Hamilton, Bermuda.

MFA frees, still does poorly

MFA Financial's $100 million of 8% $25-par senior notes due April 15, 2042 freed from the syndicate Thursday morning, a trader reported.

Still, paper was holding in at $24.55 in the gray market.

"They must have given a lot away," the trader said of the deal's poor performance. "It's a small deal that not a lot of people are interested in."

The trader added that he was "a little surprised" that investors weren't more curious about the deal given the "juicy coupon."

"It hasn't seemed to gain any traction," he said. Furthermore, he opined that the recent "flood of REITs" had possibly saturated the market.

"Some of these are bound to be a little soft out of the gate," he said.

Interest is payable quarterly on the 15th of January, April, July and October.

The company has the option to redeem the notes on or after April 15, 2017. In the event of a change of control, MFA will be required to offer to repurchase the securities at 101% of par plus accrued interest.

The company will apply to list the notes on the New York Stock Exchange under the ticker symbol "MFO." Settlement is expected Wednesday.

Morgan Stanley & Co. LLC, UBS and Wells Fargo are the joint bookrunning managers. RBC Capital Markets LLC, Cantor Fitzgerald & Co., Credit Suisse, Deutsche Bank, JPMorgan and JMP Securities are the co-managers.

Proceeds will be used to acquire mortgage-backed securities consistent with the firm's investment policy and for working capital, which may include the repayment of repurchase agreements.

MFA is a New York-based real estate investment trust engaged in the business of investing, on a leveraged basis, in residential agency and non-agency mortgage-backed securities.

Digital Realty lists

Digital Realty Trust Inc.'s $175 million offering of 6.625% series F cumulative redeemable perpetual preferred stock listed on the New York Stock Exchange Thursday.

The ticker symbol is "DLRPF." The issue priced March 29.

A trader quoted the paper at $24.85 bid, $24.90 offered. The preferreds closed down 22 cents at $24.88.

Digital Realty is a San Francisco-based REIT focused on data center and technology buildings.

RBS dominates again

Royal Bank of Scotland preferreds again dominated the secondary realm Thursday. The 6.35% series N noncumulative dollar preference shares and the 7.25% series T noncumulative dollar preference shares got the lion's share of attention.

The Ns (NYSE: RBSPN) closed flat at $16.68, and the Ts (NYSE: RBSPT) closed down a nickel at $19.15.

"I would bet they were a swap in and out by the same investor," a market source said of the trades. "But maybe not."

RBS is an Edinburgh-based bank that is majority owned by the U.K. government.

FelCor firms

FelCor Lodging Trust Inc.'s 8% series C cumulative redeemable preferreds (NYSE: FCHPC) were also among the day's busiest securities, trading up 40 cents, or 1.57%, to $25.80.

"That clearly had to be investor specific," a market source speculated. "It's probably just an investor repositioning himself."

The source noted that there was news out regarding the company's sale of six "non-strategic" hotels for $103 million, "but I doubt that's [moving the price]," he said.

FelCor is an Irving, Texas-based REIT.

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