Hartford's proposed $25-par issue seen above par ahead of pricing; MFA not faring as well

By Stephanie N. Rotondo

Portland, Ore., April 2 - Preferred stocks got off to a solid start on the first trading day of April, with one source characterizing the session as "a green day."

The new issue calendar also got off to a strong start as four new issues were announced. One trader said he heard at least two more new deals are slated to come this week, with as many as five expected to launch.

However, some new deals were doing better than others. Hartford Financial Services Group, Inc. said it plans to price $25-par fixed-to-floating-rate debentures. Upon the announcement, the deal was soon trading at par and above in the gray market.

MFA Financial Inc. also launched a deal, a sale of $25-par senior notes due 2042. The deal started out doing well but faded by day's end.

Brandywine Realty Trust's proposed offering of series E cumulative redeemable preferreds fared decently, though by all accounts, the deal is expected to be on the small side.

Also, UMH Properties Inc. said it will reopen its 8.25% series A cumulative redeemable preferreds. The existing preferreds traded higher on the news, though in very thin trading.

In the secondary arena, Royal Bank of Scotland Group plc preferreds were on the rise Monday. The gains came on the back of a news article issued over the weekend speculating that the Edinburgh-based bank will soon turn its dividends back on.

Hartford pops on launch

Hartford Financial Services Group is offering fixed-to-floating-rate $25-par junior subordinated debentures due 2042, the company said in a regulatory filing on Monday.

The interest rate will be fixed until April 15, 2022. It will then be based on Libor plus an as of yet undetermined percentage. The floating rate will be reset quarterly.

At midday, a trader said the deal was already trading at par in the gray market.

After the close, a market source said he heard talk was 7.875%, with estimates of total size coming in at $500 million.

"They are targeting institutional buyers on that," he said, seeing a $25.05 bid, $25.15 offered market in the gray.

Hartford will apply to list the notes on the New York Stock Exchange.

Citigroup Global Markets Inc. and Goldman Sachs & Co. are the joint structuring advisers and bookrunning managers. Bank of America Merrill Lynch, Barclays Capital Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC are also acting as joint bookrunners.

Proceeds from the sale will be used toward a planned repurchase of 10% fixed-to-floating-rate junior subordinated debentures due 2068.

Hartford Financial is an insurance and financial services company based in Hartford, Conn.

MFA plans new deal

Unlike the Hartford deal, MFA Financial's proposed sale of at least $75 million of $25-par senior notes due April 15, 2042 was "not doing quite as well."

The trader pegged the issue at $24.60 bid, $24.65 offered in the gray market. That was down from levels heard earlier in the day around $24.80.

Price talk is 8% to 8.125%.

The company will apply to list the notes on the NYSE under the ticker symbol "MFO."

Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunning managers. RBC Capital Markets LLC, Cantor Fitzgerald & Co., Credit Suisse Securities (USA) LLC, Deutsche Bank, JPMorgan and JMP Securities are the co-managers.

Proceeds will be used to acquire mortgage-backed securities consistent with the firm's investment policy and for working capital, which may include the repayment of repurchase agreements.

MFA is a New York-based real estate investment trust engaged in the business of investing, on a leveraged basis, in residential agency and non-agency mortgage-backed securities.

Brandywine to issue preferreds

Brandywine Realty Trust is expected to sell at least $50 million of series E cumulative redeemable preferreds, according to a trader.

The trader said that price talk was originally around 7% but that it was then revised to 6.9%. He expected pricing to come Monday, though by press time, that had not occurred.

The trader saw $24.70 offered for the paper early on in the session. He later saw that increase to $24.80.

Brandywine will apply to list the preferreds on the NYSE under the symbol "BDNPE."

Bank of America Merrill Lynch and Citigroup are the joint bookrunners.

Proceeds will be contributed to the company's operating partnership, which will use the funds for working capital, capital expenditures or other general corporate purposes, which may include acquisitions, development activities, the redemption of the series C and D preferreds and repurchases and redemptions of debt.

Brandywine is a Radnor, Pa.-based REIT.

UMH plans add-on

Freehold, N.J.-based UMH Properties launched an add-on to its 8.25% series A cumulative redeemable perpetual preferreds on Monday.

The company issued 1.34 million of the shares in May 2011. An additional 1 million preferreds will be issued in the add-on.

The existing preferreds (NYSE: UMHPA) traded up 17 cents to $26.43, though trading was very light.

The liquidation preference is $25.00 per share.

Dividends are payable on the 15th of March, June, September and December.

The company has the option to redeem the preferreds on or after May 26, 2016. There is also a change-of-control feature.

JPMorgan is the bookrunner. BMO Capital Markets Corp. is the senior co-manager. The co-managers are CSCA and Crowell Weedon.

UMH is a Freehold, N.J.-based REIT.

RBS gains on dividend hopes

Royal Bank of Scotland Group's preferreds got a boost on Monday after a news report out over the weekend opined that the bank could soon be paying out dividends again.

"That's what we've been expecting anyway," one market source said.

The 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) were the busiest securities of the day, with about 2.09 million shares changing hands. They rose 7 cents to $19.07.

The 6.4% series M noncumulative dollar preference shares (NYSE: RBSPM) were also active, improving 28 cents, or 1.7%, to $16.72.

Over the weekend, British news outlets reported that the 82% government-owned bank was in talks to "turn the tap back on." This is no surprise to some stateside who have been expecting the dividends to come back once a moratorium expires in April.

A source also noted that Lloyds Banking Group's announcement last month that it was going to be paying out soon "didn't hurt."

Source: Swapping Deutsche

A market source speculated that an investor was "swapping out of one [Deutsche Bank AG] issue and into another one" Monday, as two issues traded actively and close in overall volume - but one drifted lower while the other gained slightly.

The bank's 8.05% trust preferreds (NYSE: DKT) dropped 12 cents to $26.72, with nearly 334,500 shares turning over. The 6.55% trust preferreds (NYSE: DXB) meantime inched up a penny to $24.20, with over 345,000 shares trading.

The bank is based in Frankfurt.

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