Preferred market gets new issues from GE Capital, American Financial; Public Storage frees

By Stephanie N. Rotondo

Phoenix, June 7 - Preferred stocks were holding their own in Thursday trading even as Fitch Ratings dropped Spain's issuer default ratings to BBB from A.

"The market doesn't really care," a trader said. "Ratings don't really mean much."

Furthermore, preferred market players were kept busy toward the end of the day when the Federal Reserve finally released its proposed new capital rules under Basel III.

The new issue market continued to trickle out deals.

General Electric Capital Corp. announced a deal early in the session, a sale of $100-par series A fixed-to-floating-rate noncumulative perpetual preferred stock. The $2.25 billion offering of hybrids priced after the bell and was trading above par despite not having freed to trade.

Meanwhile, American Financial Group Inc. announced plans to sell $25-par senior notes. Like GE Capital, the deal priced after the bell. It came as a $200 million sale of 6.375% 30-year notes.

Traders said the new issue was performing reasonably well but not nearly as well as GE Capital.

Among other new deals, Public Storage's newly priced 5.625% series U cumulative perpetual preferreds freed to trade, according to a trader.

Deal of the day: GE Capital

A trader said "the big news of the day" was GE Capital's $2.25 billion sale of series A fixed-to-floating-rate noncumulative perpetual preferreds.

The deal was first announced early on in Thursday's session and priced after the close.

The trader noted that the new $100-par deal was already trading above par at 101 despite still being held up by the syndicate.

"That was the big thing," another trader said, seeing "a lot of institutional demand" for the new securities.

He also placed the paper around 101.

Dividends will be payable semiannually at a fixed rate of 7.125% through June 15, 2022. Dividends will then be paid quarterly at a floating rate equal to Libor plus 529.6 basis points.

The preferreds will not be listed on any exchange. Settlement is expected Tuesday.

Barclays Capital Inc., Bank of America Merrill Lynch, Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC are the joint bookrunners.

Proceeds will be used for general corporate purposes.

The investment company is based in Fairfield, Conn.

American Financial prices

American Financial Group sold $200 million of 6.375% $25-par senior notes due June 12, 2042 on Thursday.

Price talk was 6.375% to 6.5%, according to a trader.

The deal was also upsized from $150 million.

"It's a smaller deal, but they could possibly grow it," a trader had speculated ahead of pricing. "I imagine it'll be at the tighter end."

The trader commented that the deal was "doing pretty well" in the gray market, seeing paper trade at $24.65 around midday.

After the close, a trader said the deal was "doing OK," still trading around $24.65.

Bank of America Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunners.

The company intends to list the notes on the New York Stock Exchange. Settlement is expected Tuesday.

Proceeds from the sale will be used along with cash on hand to redeem $112.5 million of 7.5% senior notes due November 2033 and $86.25 million of 7.25% notes due January 2034. Any remaining proceeds will be used to partially redeem the company's 7.125% senior debentures due 2034, of which $115 million is outstanding.

Proceeds will also be used for general working capital purposes.

American Financial Group is a Cincinnati-based insurance company.

Public Storage frees

Public Storage's 5.625% series U cumulative perpetual preferreds freed from the syndicate on Thursday, a trader reported.

The $250 million issue, which priced Wednesday, was moving up, trading at $24.77 bid, $24.80 offered in the gray market at midday.

At the close, a trader quoted the issue at $24.75 bid, $24.80 offered.

Public Storage will apply to list the new preferreds on the New York Stock Exchange under the symbol "PSAPU." Settlement is expected June 15.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS and Wells Fargo were the joint bookrunning managers. Wells Fargo was the lead on the deal. JPMorgan and RBC Capital Markets LLC were co-managers.

Proceeds will be used to redeem $172.5 million of 7% series N cumulative preferred shares. Any remaining funds will be used for general corporate purposes, which may include investments in self-storage facilities and other possible redemptions.

Public Storage is a Glendale, Calif.-based real estate investment trust focused on self-storage solutions.

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