RBS, HSBC announce redemptions; Breitburn Energy falls; new deals expected to flow

By Stephanie N. Rotondo

Seattle, May 16 – The preferred stock market was strong as the new week began.

The Wells Fargo Hybrid and Preferred Securities index was up 24 basis points at the close. The index had been up 15 bps at mid-morning.

“There’s a lot of stuff going on in the market,” one market source said, “especially redemption-wise.”

On Monday, Royal Bank of Scotland Group plc announced that it was redeeming three outstanding trust issues, “which is kind of a big thing,” a trader said.

The bank’s preferreds dominated trading in the wake of the news.

After the bell, HSBC Finance Corp. announced a redemption of its own, calling all $575 million of its 6.36% series B noncumulative preferreds.

Away from redemption news, Breitburn Energy Partners LP announced that it had filed for bankruptcy protections. Its preferred units did not take the news well, though its corporate debt managed to gain some traction.

RBS, HSBC plan redemptions

Redemption news was pushing around certain names on Monday, particularly Royal Bank of Scotland,

The Edinburgh, Scotland-based bank plans to call all $1.285 billion of its 5.9% noncumulative guaranteed trust preferred securities (NYSE: RBSPE), all $200 million of its 6.25% noncumulative guaranteed trust preferred securities (NYSE: RBSPI) and all $1.8 billion of the 6.08% noncumulative guaranteed trust preferred securities (NYSE: RBSPG), according to a notice released Monday.

The redemption will take place on June 13 at a redemption price of par plus accrued dividends.

On the news, the 5.9% preferreds were up 81 cents, or 3.31%, at $25.26. Nearly 2.5 million of the preferreds were exchanged.

The 6.08% TruPs were meantime 70 cents better, or 2.85%, at $25.28. Over 1.6 million of those securities traded.

Just after the close, HSBC said it was redeeming all of its outstanding 6.36% series B noncumulative preferreds (NYSE: HSFCPB).

In after-hour dealings, the paper came off 21 cents to $25.64.

The redemption will take place on June 30. Holders will receive par plus accrued dividends for the holdings.

Breitburn fizzles on filing

Breitburn Energy said late Sunday that it had filed for Chapter 11 protections after a month of “constructive discussions” with second-lien noteholders and bank lenders.

The Los Angeles-based master limited partnership also said it had lined up a $75 million debtor-in possession facility.

On the news, the 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) did not fare as well, falling 54 cents, or 57.45%, to 40 cents per $25-par unit.

However, a trader said the 8.625% notes due 2020 gained “almost 2 points,” closing at 9¾. The 7.875% notes due 2022 were a point better at 9¼, he said.

Calendar builds up

The primary preferred stock market was starting the week off with a couple of deals on Monday.

A trader noted that the buzz was that at least three to four deals could come over the course of the week.

But first up was American Homes 4 Rent, which was planning a sale of series D cumulative redeemable perpetual preferreds.

The deal was not expected to price Monday, according to a source.

Price talk was in a 6.625% area, according to a market source.

A trader saw the issue quoted at $24.75 bid, $24.85 offered in the early gray market.

Raymond James, FBR Capital Markets, Keefe Bruyette & Woods Inc. and Wells Fargo Securities LLC are the joint bookrunners. BB&T Capital Markets, Janney Montgomery Scott LLC, Oppenheimer & Co. and Wunderlich Securities Inc. are the co-managers.

Meanwhile, Gladstone Commercial Corp. was also said to be doing an offering of series D cumulative redeemable preferreds, the proceeds of which will be used to fund a redemption of the company’s outstanding preferreds.

Price talk was in a 6.75% to 7% range, the company said in a regulatory filing.

The deal also did not come during the session.

As for the issues to be called – assuming the company can complete the series D sale – the 7.125% series C cumulative term preferreds (Nasdaq: GOODN) were trading off 9 cents at $25.26. The 7.75% series A cumulative redeemable preferreds (Nasdaq: GOODP) were down 40 cents, or 1.54%, at $25.50.

And, the 7.5% series B cumulative redeemable preferreds (Nasdaq: GOODO) were off 31 cents, or 1.21%, at $25.27.

Each issue had above-average trading volume for the day.

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