SL Green prices upsized deal; Prudential's new issue wins over investors; profit helps Freddie

By Stephanie N. Rotondo

Phoenix, Aug. 7 - Preferred stocks were higher Tuesday, and overall activity was "busier than yesterday, but only selectively busy," a market source said.

In new deals, SL Green Realty Corp. priced an upsized $200 million offering of 6.5% series I cumulative redeemable perpetual preferreds. A trader said he expected the deal to do well.

In recently priced deals, Prudential Financial Inc.'s $1 billion of 5.875% fixed-to-floating junior subordinated notes due 2042 "took off," a market source reported, as paper traded north of par.

The $1,000-par deal priced Monday.

In the secondary arena, Freddie Mac preferreds were up 25 cents to 35 cents on the back of a $3 billion second-quarter profit.

The government-backed mortgage company also said that it will not need additional federal aid.

"There might be a ray of hope that someday those are worth something," a trader said.

SL Green prices

SL Green Realty priced $200 million of 6.5% series I cumulative redeemable perpetual preferred shares.

The deal was expected to be $100 million. Pricing came at the low end of talk.

Ahead of pricing, a trader said the deal was "going to do quite well. Retail seems to be snapping it right up." The trader saw the issue trading at $24.65 in the gray market.

Wells Fargo Securities LLC, Bank of America Merrill Lynch, Citigroup Global Markets Inc. and UBS Securities LLC are the joint bookrunners.

Proceeds will be contributed to the company's operating partnership in exchange for an equal number of series I cumulative redeemable preferred units. The operating partnership expects to use all or a portion of the proceeds to redeem all or a portion of outstanding series C preferred stock. Any remaining proceeds may be used to repay outstanding debt and for general corporate purposes.

SL Green is a New York-based real estate investment trust.

Prudential a big hit

Prudential Financial's newly priced $1 billion of 5.875% $1,000-par fixed-to-floating junior subordinated notes due Sept. 15, 2042 were trading north of par just one day after pricing.

A trader saw the issue at 102 offered at midday.

"That did well," the trader said. "Prudential's always a very good name."

"That thing took off this morning like crazy," another market source said. Right out of the gate, the notes were trading higher than they were Monday. The paper eventually hit highs around 104 before easing back to end in a 101-102 context.

The source said the volume-weighted average price was around 102.

"$1,000-pars are more likely to perform well as a general rule," the source said. On top of that, there remains a "big search for yield from investors."

The notes bear interest at 5.875% until Sept. 15, 2022, at which point the rate will reset to Libor plus 417.5 basis points.

Goldman Sachs & Co., Bank of America Merrill Lynch, HSBC Securities (USA) Inc., Citigroup and UBS are the joint bookrunners. The co-managers are Mitsubishi UFJ (USA) Securities LLC, Mizuho Securities USA Inc., RBS Securities Inc. and SMBC Nikko Capital Markets Ltd.

Proceeds will be used for general corporate purposes and to redeem outstanding retail medium-term notes, including those under the InterNotes program.

Prudential is a Newark-based financial services company.

Freddie rises on earnings

Freddie Mac's preferreds "were pretty active," a market source said, after the government-backed mortgage purchaser reported a $3 billion profit for the second quarter and said that it will not need federal aid at this time.

A trader said the news boosted Freddie's preferreds by 25 to 35 cents.

Freddie's 8.375% fixed-to-floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) rose 36 cents, or 18.27%, to $2.33. The 5.79% noncumulative perpetual preferreds (OTCBB: FMCCK) increased 29 cents, or 10.86%, to $2.96.

Freddie saw its bottom line positively impacted by an improving housing market. For the quarter, the company provided for loan losses of $200 million, down from $1.9 billion in the first quarter. In addition to boosting profit, that meant there was enough cash flow to make a $1.8 billion dividend payment to the government.

Given the profit, the company said it will not have to seek federal aid for the time being. That leaves its current bill from taxpayers at $72.3 billion.

"It's very speculative in nature," a market source said, obviously not believing the hype. "It doesn't mean much. They're not paying all that [taxpayer money] back anytime soon."

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