Preferreds up early, erase gains by the bell; Hercules prices add-on; Customers prices

By Stephanie N. Rotondo

Seattle, April 21 – The preferred stock market was modestly higher in early trading on Thursday but ultimately ended with a slightly weaker tone.

The Wells Fargo Hybrid and Preferred Securities index closed down 8 basis points. The index was up 3 bps at mid-morning.

A trader noted, however, that the moves came amid limited trading. With the Women’s Syndicate Association’s annual spring luncheon kicking off in New York, it was largely expected that trading would slow down toward the end of the week.

And even though it was expected that the primary space would go silent as a result of the party, a couple of smaller deals were getting done.

Hercules Capital Inc. – formerly Hercules Technology Growth Capital Inc. – said it sold an additional $65.4 million of its 6.25% $25-par unsecured notes due 2024 (NYSE: HTGX), lifting the total outstanding amount to $169.4 million.

The notes finished the session off 17 cents at $24.66, after trading up a penny to $24.84 earlier in the day.

Keefe Bruyette & Woods Inc., Jefferies LLC and RBC Capital Markets LLC were the joint bookrunning managers. Sandler O’Neill + Partners LP was lead manager, and BB&T Capital Markets and Janney Montgomery Scott LLC were co-managers.

Meanwhile, Customers Bancorp Inc. brought $50 million of 6.45% series E fixed-to-floating rate noncumulative perpetual preferreds.

Shortly before the close, a market source saw the new preferreds quoted at $24.95 bid, $25.05 offered.

Price talk was around 6.5%, according to a market source. The deal came upsized from $40 million.

UBS Securities LLC and Morgan Stanley & Co. LLC led the deal.

The bank’s 6.5% series D fixed-to-floating rate noncumulative perpetual preferreds (NYSE: CUBIPD) were softer on word of the new deal, slipping 29 cents, or 1.14%, to $25.20. The 6.375% $25-par senior notes due 2018 (NYSE: CUBS) were meantime steady at $26.56.

When declared, dividends will be paid on a quarterly basis at the fixed rate until June 15, 2021. At that time, the rate will float at Libor plus 514 bps.

The preferreds become redeemable on or after June 15, 2021 or within 90 days of a regulatory capital treatment event at par plus accrued dividends.

The Wyomissing, Pa.-based bank will use proceeds for general corporate purposes, which may include working capital and the funding of organic growth at Customers Bank.

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