Primary sees supply with deal from Excel Trust; U.S. Bancorp, Stifel deals free to trade

By Stephanie N. Rotondo

Portland, Ore., Jan. 19 - Preferred stocks experienced a "bizarre end to the day," a market source said Thursday.

Most of the session, he said, preferred stocks were firm. But in the last 20 minutes of trading, the market went from better to worse, according to the Wells Fargo Hybrid and Preferred Security Financial index.

"The market just completely faded," he said. "The index gains were gone. But it didn't feel like that, like there was panic selling or anything of that nature."

Inflows of new deals continued to come, with Excel Trust Inc. announcing plans for an offering of series B cumulative redeemable perpetual preferred shares. There was not much in the way of quotes for the new issue, traders reported, which they attributed to it being a small deal.

Late Wednesday, Hudson Pacific Properties Inc. priced a reopening of its 8.375% series B cumulative redeemable perpetual preferred stock. By Thursday's close, the preferreds had dropped nearly 2%.

Among other recent deals, both U.S. Bancorp and Stifel Financial Corp. saw their deals free to trade. Both issues continued to trade at par or above.

Elsewhere, Bank of America Corp. preferreds were gaining momentum after the company released a better-than-expected earnings report. The Charlotte, N.C.-based bank also said it was tendering for $1.5 billion of $1,000-par notes.

Primary sees new REIT issue

San Diego-based real estate investment trust Excel Trust heralded plans to sell at least $50 million of series B cumulative redeemable perpetual preferred shares in a regulatory filing on Thursday.

A trader said price talk was in the 8.125% area.

"It's a tiny deal," he said. "I imagine it priced very quickly."

He saw a $24.70 bid in the gray market, but no offers for the new issue. Another market source saw no quotes in the name.

"I wouldn't expect it to do overly well," the second source said.

The deal did not price Thursday.

Dividends will be payable quarterly in arrears on the 15th day of January, April, July and October. The company can redeem the preferreds on or after January 2017 at par plus accrued and unpaid dividends.

The preferred stock can also be redeemed in the event of a change of control or in instances relating to the company's status as a REIT.

In the event of a change of control and/or a delisting of its common stock, holders of the preferreds will have the option to convert the preferreds into common shares.

Wells Fargo Securities LLC, Raymond James & Associates Inc. and UBS Securities LLC are the joint bookrunners.

Proceeds will be contributed to the operating partnership, which will in turn use the funds to repay debt under an unsecured revolving credit facility, for future acquisitions and other general corporate and working capital purposes.

Excel will apply to list the new preferreds on the New York Stock Exchange under the ticker symbol "EXLPB."

Hudson slips post-pricing

Late Wednesday, Hudson Pacific Properties priced a $50 million reopening of its 8.375% series B cumulative redeemable perpetual preferred stock.

The new preferred shares were sold to the public at $25.1861, an approximately 5% discount to the Jan. 18 closing share price of $26.50.

Underwriters received a further discount of 78.75 cents per share.

The issue (NYSE: HPPPB) closed down 49 cents, or 1.88%, to $26.01.

Dividends are payable quarterly on the last business day of March, June, September and December.

There is a change-of-control and/or delisting clause that allows holders to receive cash dividends at an increased rate of 12.375%.

The preferreds become redeemable at the company's option on Dec. 10, 2015 or in the event of a change of control.

Wells Fargo Securities LLC, Bank of America Merrill Lynch and Barclays Capital Inc. are the bookrunners.

Proceeds will be contributed to the company's operating partnership in exchange for 8.375% series B cumulative redeemable preferred units. The operating partnership will then use the funds to repay debt under a secured revolver.

Hudson Properties is a Los Angeles-based real estate investment trust.

U.S. Bancorp frees to trade

U.S. Bancorp's recent issue - over $1 billion of 6.5% fixed-to-floating series F noncumulative perpetual preferreds, a deal that priced Wednesday - freed to trade Thursday morning, a market source said.

He saw the issue last trade at $25.22 in the gray market. The low tick of the day was around par, he said, with the volume weighted average price coming in at $25.17.

Another trader saw the issue at $25.20 shortly before the market closed.

The shares were issued as depositary shares representing 1/1,000th of an interest in the series F shares. Liquidation preference is $25,000 per preferred share.

When declared by the board of directors, dividends will be payable quarterly on the 15th of January, April, July and October, beginning April 15. The dividend rate will be fixed until Jan. 15, 2022, at which time the dividend will be based on Libor plus a spread of 4.468%.

The Minneapolis-based bank also has the option to redeem the preferreds after Jan. 15, 2022 at par plus declared and unpaid dividends. The preferreds can be redeemed prior to Jan. 15, 2022 in the event of a "regulatory capital treatment event."

Morgan Stanley & Co. Inc., Goldman Sachs & Co. and U.S. Bancorp Investments Inc. are the joint bookrunners.

Proceeds will be used for general corporate purposes, including the redemption of certain callable trust preferreds. Pending such use, the company has the right to temporarily invest the funds or use it to pay down short-term debt.

Stifel also frees up

Stifel Financial's $175 million sale of 6.7% $25.00-par senior notes due 2022 - another deal that priced Wednesday - also freed, according to the source.

He said that most of the trades were around par but that the last trade was $25.10. The VWAP was $25.02.

Interest will be payable quarterly on the 15th of January, April, July and October, beginning April 15.

The notes come due Jan. 15, 2022 and will be issued in denominations of $25.00.

The St. Louis-based financial services firm has the option to redeem the notes, in whole or in part, after Jan. 15, 2015 at par plus accrued and unpaid interest.

Stifel, Nicolaus & Co. Inc., Bank of America Merrill Lynch, Morgan Stanley and UBS Securities are the joint bookrunners. U.S. Bancorp Investments Inc. is the co-manager and Credit Suisse Securities (USA) LLC is the joint lead manager.

Proceeds will be used for general corporate purposes.

Bank of America makes headway

Bank of America preferreds were gaining ground after the bank reported better-than-expected earnings and also announced a tender for up to $1.5 billion of $1,000-par notes.

The busiest of the bank's preferred complex was the 8.2% series H depositary shares (NYSE: BACPH), of which more than 680,000 shares turned over. The preferreds gained 9 cents, closing at $23.95.

The Merrill Lynch linked 8.625% series B noncumulative preferreds (NYSE: BMLPQ) were also active, moving up a dime to $24.35.

Bank of America reported a profit of $1.99 billion, or 15 cents per share, compared to a year-ago loss of $1.24 billion, or 16 cents per share.

The gains were due in part to many one-time charges and writedowns, several coming from the asset sales the company did over the year.

Total revenues were $24.89 billion, up 11%.

Additionally, the company announced a cash tender for several series of $1,000-par subordinated notes. Some issues are being called at a discount.

The tender offer expires Feb. 15.

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