Jobs data, firm equities boost preferreds; Aegon's notes break par; Realty Income 'phenomenal'

By Stephanie N. Rotondo

Portland, Ore., Feb. 3 - Preferred stocks were "moving up" on Friday on the back of a good jobs report and an ever-climbing equity market, a trader said.

"Everything [in the preferred space] was focused around new issues," another trader said.

Aegon NV's $500 million issue of 8% $25-par notes has been steadily creeping higher all week. By Friday, the notes were finally breaking par.

Realty Income Corp.'s $325 million offering of 6.625% monthly income class F cumulative redeemable preferreds were also moving into par territory. One trader enthused that the deal was "a phenomenal piece of paper."

Aegon breaks par

When Aegon priced its $500 million issue of 8% $25-par noncumulative subordinated notes due Feb. 15, 2042 on Jan. 24, it did little to generate excitement among market players.

As such, the deal had been lagging a bit - that is, until this week.

All week, the paper was rising ever so slightly. On Friday, the notes began trading at levels around par.

"It finally traded above par today," one trader reported Friday.

Another trader said the deal was faring "much better," also pegging the issue around par.

When the deal was priced, it was upsized from $250 million. The notes came at the low end of price talk.

Proceeds are being used for general corporate purposes.

The life insurance, pension and investment products company is based in the Hague, the Netherlands. Aegon intends to list the new notes on the New York Stock Exchange.

Realty Income 'phenomenal'

Realty Income brought a $325 million sale of 6.625% monthly income class F cumulative redeemable perpetual preferreds on Tuesday. By Friday, the issue was trading around par, according to a trader.

The trader said that the paper "had the largest, broadest audience for buyers I've seen in a long time." Because it pays dividends on a monthly basis, retail buyers and insurance companies were scooping it up.

"Retail and insurance love monthly pays," he said.

And, with a 6.625% dividend, "it's a phenomenal piece of paper."

At pricing Tuesday, the deal came at the low end of price talk, which was 6.625% to 6.75%.

The Escondido, Calif.-based real estate investment trust intends to list the preferreds on the NYSE. Settlement is expected Tuesday.

Proceeds will be used to redeem the trust's $127.5 million of 7.375% monthly income class D cumulative redeemable preferreds. The issue will be redeemed at par plus accrued dividends on March 1.

Remaining funds will be used to repay borrowings under the company's $425 million acquisition credit facility.

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