CAI launches $25 million preferreds; Tristate up, Apollo down; finance names active

By Abigail W. Adams

Portland, Me., March 21 – The primary market remains active in the preferreds space with another preferred offering launched prior to the market open.

CAI International, Inc. plans to price $25 million of $25-par perpetual series A fixed-to-floating rate cumulative redeemable preferred stock after the market close on Thursday with price talk for an initial dividend in the 8.5% area, according to a market source.

The deal size may be upsized and the pricing accelerated, depending on market demand, the source said.

Recently priced preferreds from Apollo Global Management LLC and TriState Capital Holdings Inc. continued to see active trading during Wednesday’s session.

Apollo’s 6.375% $25-par series B non-cumulative perpetual preferred shares continued to lose ground while TriState’s depositary shares representing the company’s 6.75% perpetual fixed-to-floating rate series A non-cumulative preferred stock saw large gains.

As the long-anticipated rate hike from the Federal Reserve was announced on Wednesday, financial industry names were active in the preferreds space with some seeing a slight dip in high-volume trading.

Goldman Sachs Group, Inc.’s depositary shares representing the company’s 5.5% series J fixed-to-floating rate non-cumulative preferred stock saw nearly four times their average trading volume during Wednesday’s session.

Deutsche Bank Contingent Capital Trust II’s 6.55% trust preferred securities saw more than three times their average trading volume.

CAI’s deal

CAI plans to price $25 million of $25-par perpetual series A fixed-to-floating rate preferreds after the market close Thursday although the deal size may be upsized and pricing accelerated based on demand, a market source said.

Price talk is for an initial dividend in the 8.5% area.

The preferreds will carry a fixed dividend until April 15, 2023 when they will switch to a floating rate of Libor plus a to-be-determined spread, according to a 424B5 filing with the Securities and Exchange Commission. Dividends are payable quarterly.

The preferreds are freely callable at par after April 15, 2023. The preferreds are also redeemable upon a change-of-control event.

They will be listed for trade on the New York Stock Exchange.

Recent deals

As the primary market prepares another new preferred stock offering, recent deals from Apollo and TriState continued to see active trading.

While spending much of last week at par, Apollo’s 6.375% preferreds continued to trade down on Wednesday. The preferreds closed Wednesday at $24.87, a decrease of 8 cents or 0.32%.

Tristate’s depositary shares representing the company’s 6.75% perpetual fixed-to-floating rate series A preferreds saw large gains during Wednesday’s session.

The depositary shares were up to $25.49, an increase of 20 cents or 0.79%, at the market close Wednesday.

Finance names active

As Federal Reserve chairman Jerome Powell delivered his first press conference and announced an interest rate hike to a range of 1.5% to 1.75%, some preferreds from financial industry names were actively traded.

Goldman Sachs’ depositary shares representing the company’s 5.5% series J fixed-to-floating rate non-cumulative preferred stock saw nearly four times their average trading volume on Wednesday.

The depositary shares closed Wednesday at $26.58, a decrease of 7 cents or 0.25%.

More than 406,000 shares were in play on Wednesday versus the three-month average of 100,000.

Deutsche Bank Contingent Capital Trust II’s 6.55% preferred securities also saw above-average trading volume. The preferreds closed Wednesday at $25.65, a decrease of 9 cents or 0.34%.

More than 183,000 preferreds were in play during Wednesday’s session versus the three-month average of 58,000.

The uncertainty surrounding Federal Reserve rate increases was pointed to as a cause for the low trading volume in the preferred space. There was speculation that rate increases would be more aggressive than previously announced.

However, the Federal Reserve signaled it would stay the course with three interest rate hikes in 2018.

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