Morning Commentary: Strong demand seen for Newtek baby bond issue; preferreds improve

By Abigail W. Adams

Portland, Me., Feb. 16 – There was “very strong retail demand” for Newtek Business Services Corp.’s $25-par five-year fixed-rate notes, which priced after the market close Thursday with both the deal and greenshoe upsized, a market source said.

Newtek priced an upsized $50 million of 6.25% five-year notes at par of $25 after the market close Thursday. Pricing came at the midpoint of talk for a coupon of 6.125% to 6.375%, according to a market source.

Keefe, Bruyette & Woods is the bookrunning manager for the deal, which carries an upsized greenshoe of $7.5 million. BB&T Capital Markets, Compass Point, D.A. Davidson & Co. and Ladenburg Thalmann are co-managers.

The initial deal size had been for $40 million with a greenshoe of $6 million. “Demand exceeded supply,” a market source said.

There was a two-day bookbuilding process for the deal, which was announced prior to market open Thursday, but it was accelerated, according to a market source.

Newtek’s baby bond offering is the first new deal to price this week. While there have been rumors of deals in the pipeline, many expected the volatility in the broader markets to settle down before seeing new deals price.

The Newtek deal had been in the works for a few weeks but was placed on hold due to the volatility in the markets, a market source said. However, the initial price talk was adjusted to close the deal.

The new notes will be listed for trading on the Nasdaq Global Market under the ticker “NEWTI.”

After seeing mostly losses since the turbulence in the markets began, the broader preferred stock market was poised for an upbeat end to the week on Friday.

The Wells Fargo Hybrid & Preferred Securities Financial index was up 0.12% and the U.S. iShares Preferred Stock ETF was up 0.28% early in Friday’s session.

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