Preferreds end firm post-holiday; Goldman's $25-par, $1,000-par offerings price, free to trade

By Stephanie N. Rotondo

Phoenix, April 21 - The preferred stock market was on the rise after the long-three day holiday weekend.

The Wells Fargo Hybrid and Preferred Securities index was up 36 basis points as of mid-morning on Monday. It finished the day up 31 bps.

As was expected, the new issue pipeline was beginning to flow, as the Goldman Sachs Group Inc. announced plans for not one, but two new deals.

The New York-based investment bank said it was selling $25-par series K fixed-to-floating rate noncumulative perpetual preferred stock, as well as $1,000-par series L fixed-to-floating rate noncumulative perpetual preferred stock.

The $25-par paper will be listed; the $1,000-par will not.

A trader said price talk on the $25-par securities was around 6.5%, while talk on the $1,000-pars was around 6%.

"It seems to be doing well and being placed mainly by the lead manager," he said, seeing the series Ks trade in a $24.87 to $24.90 context in the gray market. He noted that the issue had ticked up as high as $24.95.

"There should be enough demand to soak these things up without any real fluctuations in the secondary market," he said.

Both deals priced shortly before the market closed, according to one source. The New York-based bank sold $700 million of the $25-par preferreds at par to yield 6.375%.

When the issue begins floating on May 10, 2024, the dividend will be payable at Libor plus 282.5 bps.

As for the $1,000-par deal, $1.3 billion of those preferreds were sold, pricing at 5.7%.

That deal begins floating on May 10, 2019 at Libor plus 388.4 bps.

The source noted that both deals also freed from the syndicate. After freeing, the $25-pars were seen at $25.02 bid, while the $1,000-pars were at 101.375 bid.

The source added that the $1,000-pars closed just slightly higher, closer to 101.5.

Goldman Sachs & Co., BofA Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, RBC Capital Markets, UBS Securities LLC and Wells Fargo Securities LLC were the joint bookrunning managers for the $25-par deal. Goldman ran the books by itself on the $1,000-par offering.

Proceeds will be used to provide additional liquidity and for general corporate purposes.

Among the bank's older issues, the (NYSE: GSPI) series I paper was the most actively traded security of the day, a source said.

The paper closed down 8 cents at $23.42.

A source said that Goldman was likely done issuing for at least the next six months.

"[The new deals] pretty much fills them to capacity," he said, noting that any other preferred sales would not be considered Tier I capital.

Now that the seal has been broken on the new issue deal flow, the source said he was expecting more to come throughout the week.

"I'm expecting a fair amount of issuance for the remainder of the week and into next week," he said.

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