Southern California Edison plans new issue; PS Business, Public Storage deals hover near par

By Stephanie N. Rotondo

Portland, Ore., Jan. 11 - The preferred stock market ended the midweek session essentially flat on the day, a market source reported.

The source said the market opened generally lower, hitting its lowest point early on. There was a bit of a rally, he said, with the high point coming about 20 minutes before the close.

"But that faded," he said, in the last few minutes before the bell. "It really fell apart in the last few minutes of trading."

He also noted that volume was "on the lighter side."

The new issue market continued to churn out deals. Southern California Edison Co. announced plans to sell at least $250 million of $1,000-par series E cumulative perpetual preference shares. While sources did not see any markets for the new issue, several expressed optimism that the deal would do well.

Recent deals from PS Business Parks Inc. and Public Storage continued to trade around par.

In the secondary market, Royal Bank of Scotland Group plc preferreds were among the busiest securities, according to a market source. The preferreds continued to climb higher as the market readied to hear about a restructuring plan that is expected to be released on Thursday.

SoCal Edison heralds new deal

Southern California Edison, a Rosemead, Calif.-based power company, said it will issue at least $250 million of $1,000-par series E cumulative perpetual preference shares.

Price talk is around 6.25%. The dividend will be fixed until 2022 and will then float at Libor plus a spread, according to a prospectus filed with the Securities and Exchange Commission on Wednesday.

One trader said he expects the deal to do very well because investors are "clamoring for non-financial paper."

At another desk, a source said the new issue "should perform really well.

"It's one of the better priced deals we've seen in a while," he said.

Neither source saw the issue in the gray market, and the second source noted that "the $1,000-par gray market develops more slowly."

Dividends will be payable semiannually, when declared by the board of directors, until 2022. After that, dividends will be payable quarterly.

Additionally, the company can redeem the preferreds beginning in 2022 at par plus accrued dividends.

There is no stated maturity or sinking fund clause nor any mandatory redemption features.

Barclays Capital Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Williams Capital Group LP are the bookrunners.

Proceeds will be used to repay commercial paper borrowings and for general corporate purposes.

The preferreds will not be listed.

Recent deals hover around par

Among other recent deals, Glendale, Calif.-based PS Business Parks' $200 million issue of 6.45% series S cumulative redeemable perpetual preferreds continued to trade around par.

"It's doing good," a trader said, quoting the issue at $24.98 bid, $25.05 offered.

Another source saw the preferreds close around $25.10.

The issue priced on Monday.

The preferreds were issued as depositary shares each representing 1/1,000th of a preferred. Each depositary share has a liquidation preference of $25.00.

Dividends are payable quarterly beginning March 31. The company can redeem the preferreds beginning Jan. 18, 2017 at par plus accrued dividends.

Bank of America Merrill Lynch, Morgan Stanley and Wells Fargo Securities LLC are the bookrunners.

The company intends to use a portion of the proceeds for its redemption of all of its outstanding 7.375% series O cumulative preferreds, which was also announced on Monday. The redemption will take place Feb. 13 and will be made at par plus accrued dividends from Jan. 1.

The real estate investment trust plans to list the preferreds on the New York Stock Exchange under the ticker symbol "PSBPS."

Public Storage's 5.9% series S cumulative preferreds, a deal that priced Thursday, were also hovering around par.

One trader pegged the preferreds at $24.97 bid, par offered. Another also placed the paper around par.

RBS gains continue

Royal Bank of Scotland preferreds continued to move up Wednesday as the market prepared for the Edinburgh-based bank to release a restructuring plan on Thursday.

The 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG) were one of the busiest securities of the day. Nearly 584,000 of the securities changed hands. The issue closed up 12 cents, or 1.07%, at $11.31.

The 6.75% series Q noncumulative dollar preference shares (NYSE: RBSPQ) were also busy and better, rising 24 cents, or 1.67%, to $14.60.

RBS is expected to announce a restructuring plan on Thursday that will likely include the loss of thousands of jobs. The bank is also expected to announce how it will refocus its efforts on its retail operations.

The bank has reportedly hired Lazard Ltd. as a restructuring adviser.

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