First Republic brings upsized, tightened deal; New York Electric & Gas calls $100-par issues

By Stephanie N. Rotondo

Portland, Ore., May 24 - Preferred stocks had a "decent bounce back," a trader said around midday on Thursday.

"I think it's going to be a sideways market until we get an election out of Greece or at least an idea of how that election will go," he said.

The trader also noted that he expects Friday to be a slow day given the upcoming Memorial Day holiday.

Another trader said he was not sure what had sparked gains in the preferred world. He also said he expects Friday's session to be "soft," as many market players are expected to be out.

In new issues, a previously anticipated deal via Morgan Stanley & Co. LLC was announced early in the session. First Republic Bank announced that it was issuing at least $100 million of series B noncumulative perpetual preferreds. The deal later priced at $150 million, and the rate came at the tight end of revised talk.

In the secondary, a trader said New York State Electric & Gas Corp. called all of its preferred issues. He deemed the call interesting given that the $100-par securities are "obscure."

First Republic deal comes

First Republic Bank brought a $150 million offering of 6.2% series B noncumulative perpetual preferred stock on Thursday.

Price talk was originally 6.25% to 6.375%, according to a trader, but was later revised to 6.25%. Around midday, the trader further opined that talk "may even go lower."

The deal was upsized from $100 million.

"It should be supported pretty well," he added, seeing the preferreds trading at $24.90 in the midday gray market.

After the bell, another trader quoted the issue at $24.83 bid, $24.88 offered, noting that it was "very quiet."

The trader also did not find it "unusual" that pricing was revised and tightened several times.

"It's a small deal, a good credit," he said. "Retail really likes it."

Morgan Stanley & Co. LLC, Bank of America Merrill Lynch and J.P. Morgan Securities LLC are the joint bookrunners.

The liquidation preference is $1,000 per preferred. The securities (Baa3/BBB) will be issued as $25-par depositary shares each representing 1/40th of an interest in a preferred.

The San Francisco-based bank has applied to list the new preferreds on the New York Stock Exchange under the ticker symbol "FRCPB." Settlement is expected June 1.

Proceeds will be used for general corporate purposes, which may include funding loans or purchasing investment securities. The offering will also increase the bank's tier I capital, allowing it to offset a possible redemption of First Republic Preferred Capital Corp.'s 7.25% series D noncumulative perpetual preferred stock.

Those preferreds (Nasdaq: FRCCO) traded down 24 cents to $25.45.

Recent deals do well

Among other recently issued preferreds, the 5.625% perpetual cumulative trust preference securities (NYSE: SCEPF) issued by Southern California Edison Co.'s SCE Trust I traded up 8 cents to $24.45.

U.S. Bancorp's 6% fixed-to-floating-rate series G noncumulative perpetual preferreds (NYSE: USBPN) meantime moved up 22 cents to $25.82, and PNC Financial Services Group, Inc.'s 6.125% fixed-to-floating-rate series P noncumulative perpetual preferreds (NYSE: PNCPP) earned 15 cents, ending at $25.07.

New York State Electric calls

A trader reported that New York State Electric & Gas - "an old utility company" with "obscure" $100-par preferreds - called all of its preferred securities. The redemption will occur June 22.

The 4.4% cumulative preferreds (OTOTC: NGESM) are being called at $102.00, the 4.5% 1949 series cumulative preferreds (OTOTC: NGEGP) at $103.75, the 4.15% 1954 series cumulative preferreds (OTOTC: NGEGM) at $102.00 and the 3.75% cumulative preferreds (OTOTC: NGEGN) at $104.00, in each case plus accrued dividends.

Though there was little trading in the called issues, all of them are currently trading at a discount to the call price. The 4.4% preferreds were at $94.00, while the 4.5% preferreds were at $99.50. The 4.15% issue closed at $85.00, while the 3.75% securities earned $10.25, or 11.14%, to end at $102.25 in minimal trading.

The New York-based power provider is a subsidiary of Iberdrola USA Inc.

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