Preferreds strengthen despite light volume; RBS has 'room to run'; Hercules brings add-on

By Stephanie N. Rotondo

Phoenix, July 2 - The preferred market was stabilizing Monday after "jumping around because of quarter-end on Friday," a trader said.

According to the trader, many securities were "overbought towards the end of the quarter."

Royal Bank of Scotland Group plc was on the rise, though on no fresh news. One market source opined that the market was starting to realize the potential value of the preferred securities.

In the primary arena, Hercules Technology Growth Capital Inc. announced it had priced a $38.75 million add-on to its 7% notes due April 30, 2019. However, the issue was thinly traded.

The company originally issued $43 million of the notes on April 17.

RBS preferreds shine

Royal Bank of Scotland Group's preferreds were among the most actively traded securities of the day, though there was no fresh news to act as catalyst.

The preferreds were also gaining ground.

"It's about time," a market source said. "We still think they have room to run."

The 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) closed up 12 cents at $19.77. The 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) were also up 12 cents, and they closed at $17.85.

The 6.35% series N noncumulative dollar preference shares (NYSE: RBSPN) gained 3 cents, finishing the day at $17.28.

Though not as actively traded as the aforementioned issues, the 5.9% noncumulative guaranteed trust preferreds (NYSE: RBSPE) were up the most percentage-wise. The preferreds ended up 66 cents, or 4.75%, at $14.55.

RBS is an Edinburgh-based bank.

Hercules brings add-on

Hercules Technology Growth Capital priced a $38.75 million add-on to its 7% senior notes due April 30, 2019 on Monday, according to a press release.

The issue (NYSE: HGTZ) was up 15 cents by mid-afternoon, though in very thin trading, at $25.50.

At the market's close, however, the notes had fallen 14 cents to end at $25.21.

There is a $5.81 million greenshoe on the reopening.

Stifel, Nicolaus & Co. Inc., BB&T Capital Markets, Janney, Montgomery, Scott LLC and Sterne, Agee & Leach are the joint bookrunning managers. Stephens Inc. and Wunderlich Securities Inc. are the joint lead managers.

The add-on is in addition to the $43 million of notes sold on April 17.

Proceeds will be used to fund investments in debt and equity securities in accordance with the company's investment strategy and for general corporate purposes.

Hercules is a Palo Alto, Calif.-based specialty finance firm.

Schwab loses altitude

A market source said that Charles Schwab Corp.'s 6% series B noncumulative perpetual preferreds (NYSE: SCHWPB) made the day's most active list, though, like RBS, there was no news to prompt the action.

Unlike RBS, however, the issue was trading down, losing 21 cents to close at $25.85.

"Sometimes somebody is just shuffling things out for whatever reason," the source said in explaining the possible cause of the activity.

Charles Schwab is a San Francisco-based investment firm.

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