Preferred investors hunt for yield; JPMorgan's new issue frees up; American Financial prices

By Stephanie N. Rotondo

Phoenix, Aug. 21 - Preferred stock investors continued to chase yield, a trader said Tuesday, putting much of their focus on JPMorgan & Chase Co.'s new $1.1 billion issue of 5.5% series O noncumulative preferreds.

"Most of the day has been dominated by JPMorgan markets," the trader said. "Retail is absorbing all of these new issues to lower and lower yields."

The issue priced late Monday and freed to trade Tuesday.

Meanwhile, American Financial Group Inc. priced $125 million of 5.75% $25-par senior notes due 2042.

Price talk was originally around 5.875%, according to a trader.

"It's probably [going to be] relatively small," another trader said of the new issue ahead of pricing. "Probably around 10 million shares."

In other recent deals, a trader said State Street Corp.'s $500 million of 5.25% series C noncumulative preferreds "should be listing soon." He pegged the paper around par. The deal priced Aug. 14.

Overall, a market source said the preferred stock arena was "up most of the day, but not up by a lot."

JPMorgan deal frees up

JPMorgan's new 5.5% series O noncumulative preferreds freed from the syndicate on Tuesday.

The issue was seen at $24.90 at midday. After the bell, a market source quoted the paper at $24.85 bid, $24.90 offered.

Price talk was around 5.625%, according to a trader, but was revised to 5.5%.

Total issuance was expected to be between $500 million and $1.2 billion. The deal priced late Monday at $1.1 billion.

J.P. Morgan Securities LLC is the bookrunning manager. Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are the joint lead managers.

The bank will apply to list the new series of preferreds on the New York Stock Exchange. Settlement is expected Aug. 28.

Proceeds will be used for general corporate purposes, including the repayment of debt, investments in or extensions of credit to subsidiaries, redemptions or possible acquisitions.

JPMorgan is a New York-based financial holding company.

American Financial prices

American Financial Group announced and then priced a $125 million offering of 5.75% $25-par senior notes due Aug. 25, 2042.

The deal was upsized from $100 million.

A trader saw a $24.90 bid in the midafternoon gray market. After the market closed, a trader said the notes spent the last portion of the day between $24.93 and $24.97. The volume-weighted average price was $24.81.

The source said the lower VWAP was due to "a handful of trades" earlier in the session around $24.50.

Bank of America Merrill Lynch, UBS and Wells Fargo are the joint bookrunning managers. The joint lead manager is JPMorgan.

The senior co-managers are Barclays, PNC Capital Markets LLC and Raymond James & Associates, Inc. The co-managers are Keefe, Bruyette & Woods, Inc., Macquarie Capital (USA) Inc., Mitsubishi UFJ Securities (USA), Inc. and U.S. Bancorp Investments, Inc.

Proceeds will be used to redeem all $115 million of the company's 7.125% senior debentures due 2034 at par plus accrued interest. Any remaining proceeds will be used for general corporate purposes.

American Financial is a Cincinnati-based holding company focused primarily on property and casualty insurance.

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