United States Cellular deal doubles, prices tight; U.S Bancorp brings $1,000-par issue

By Stephanie N. Rotondo

Seattle, Nov. 16 – The preferred stock market was kicking off the week by adding two new deals to the pipeline, both of which later priced.

In the $25-par space, United States Cellular Corp. announced plans to sell at least $150 million of senior unsecured notes due 2064. The deal came upsized at $300 million to yield 7.25%, the tight end of talk.

Price talk was 7.25% to 7.375%, according to a market source.

Meanwhile, U.S. Bancorp added to the $1,000-par space with its planned offering of series I fixed-to-floating rate noncumulative perpetual preferreds.

The Minneapolis-based bank sold $750 million of the preferreds at par to yield 5.125%. Initial price talk was 5.125% to 5.25%.

Overall, it was a “rough day” for the secondary preferred stock market, a market source said.

The Wells Fargo Hybrid and Preferred Securities index dropped 19 basis points in Monday trading, despite the fact that the broader markets recovered from their early losses to end in positive territory.

The source opined that the preferred market’s weakness was merely due to a muted reaction.

“There is such a strong retail presence in the $25-par market, it could just be [that investors] were slow to react,” the source said.

U.S. Cellular deal upsized

United States Cellular brought $300 million of 7.25% $25-par notes due 2064 on Monday.

The deal was originally slated for $150 million.

Prior to pricing, a trader noted that there was no selling group and remarked that Wells Fargo Securities LLC was the lead bookrunner.

“They are generally less aggressive on marketing, so I’m not sure if they will grow this or not,” the trader said.

He saw the issue quoted at $24.80 bid, $24.95 in the early gray market.

After pricing, the issue was seen at $24.85 bid, $24.87 offered.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, RBC Capital Markets and UBS Securities LLC were also acting as bookrunners.

As for the company’s existing issues, the 6.95% $25-par senior notes due 2060 (NYSE: UZA) were off 24 cents at $25.35. The 7.25% $25-par senior notes due 2063 (NYSE: UZB) were down 46 cents, or 1.77%, at $25.52.

A source said weakness in the already outstanding issues was “fairly common” in the wake of a new deal, as investors were “positioning around the new issue.”

Interest will be payable quarterly. The notes become callable on or after Dec. 1, 2020 at par plus accrued interest.

The Chicago-based cellular phone service provider intends to use the proceeds for general corporate purposes, which may include the acquisition of additional spectrum.

U.S. Bancorp taps market

U.S. Bancorp priced $750 million of 5.125% $1,000-par series I fixed-to-floating rate noncumulative preferreds on Monday.

The deal came at the tight end of talk.

At the bell, a market source said the preferreds were “up a touch,” seeing them bid for at 100.0625.

U.S. Bancorp Investments Inc., Barclays and Morgan Stanley were the joint bookrunners.

On the heels of the new issue, the 6.5% series F fixed-to-floating rate noncumulative perpetual preferreds (NYSE: USBPM) dipped 8 cents to $28.69.

Dividends will be fixed and payable semiannually through Jan. 15, 2021. At that time, the dividend rate begins to float at Libor plus 348.6 bps and is payable quarterly.

The preferreds also become redeemable Jan. 15, 2021 at par plus accrued dividends. The preferreds can be redeemed prior to that date, in whole, upon a regulatory capital treatment event.

The new securities will not be listed on any exchange.

Proceeds will be used for general corporate purposes.

U.S. Bancorp is a Minneapolis-based bank.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.