New issues keep market buzzing; GE Capital above par; American Financial frees up

By Stephanie N. Rotondo

Phoenix, June 8 - Preferred stock issuance is expected to ramp up in the near term, according to a trader in the market.

"I heard we'll probably see a couple more deals next week," he said during midday trading on Friday.

The current week's deals - Public Storage, General Electric Capital Corp. and American Financial Group Inc. - were meantime performing well.

The secondary arena was also stronger overall. News came out during the session that indicated Spain was intending to seek European Union help in recapitalizing its banks over the weekend.

However, market players continued to be engrossed in the Federal Reserve's recently released draft of new capital rules under Basel III, making for an overall light volume day.

GE Capital north of par

General Electric Capital's new $2.25 billion issue of 7.125% series A fixed-to-floating rate noncumulative perpetual preferred stock was "doing really well," the trader said.

The $100,000-par issue was trading at 103.125 bid in the gray market, he said.

A market source saw institutional quotes on the deal at 102.5 bid, 103.25 offered.

Dividends will be payable semi-annually at the fixed rate through June 15, 2022. The coupon will then convert to a floating rate equal to three-month Libor plus 529.6 basis points.

Additionally, GECC can redeem the preferred shares on or after June 15, 2022 or within 90 days of a regulatory capital treatment event.

The stock will not be listed on any exchange. Settlement is expected June 12.

Barclays Capital Inc., Bank of America Merrill Lynch, Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC are the joint bookrunners.

Proceeds will be used for general corporate purposes.

The investment company is based in Fairfield, Conn.

American Financial frees

American Financial Group's $200 million offering of 6.375% $25-par senior notes due June 12, 2042 freed from the syndicate and was trading at $24.70 bid in the gray, according to a trader.

Like GE Capital, the deal priced Thursday, coming at the tight end of talk and upsized from 6 million shares.

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

The company intends to list the notes on the New York Stock Exchange. Settlement is expected June 12.

Proceeds from the sale will be used with cash on hand to redeem $112.5 million of 7.5% senior notes due November 2033 and $86.25 million of 7.25% notes due January 2034. Any remaining proceeds will be used to partially redeem the company's 7.125% senior debentures due 2034, of which $115 million is outstanding.

Proceeds will also be used for general working capital purposes.

American Financial Group is a Cincinnati-based insurance company.

Public Storage gains ground

Public Storage's 5.625% series U cumulative perpetual preferreds were on the rise, with a trader quoting the issue at $24.80 bid, $24.85 offered.

The $250 million issue came Wednesday, at the low end of price talk.

Proceeds from the sale will be used to redeem $172.5 million of 7% series N cumulative preferred shares. Any remaining funds will be used for general corporate purposes, which may include investments in self-storage facilities and other possible redemptions.

Public Storage is a Glendale, Calif.-based real estate investment trust focused on self storage solutions.

Financials firm

Following the trend of the broader market, the secondary preferred market was mostly green as the week wore down.

There was a generally firm tone among financials.

Ally Financial Inc.'s 8.125% trust preferreds (NYSE: ALLYPA), for instance, rose 6 cents to $23.20.

Royal Bank of Scotland Group Plc paper was also higher. The 6.08% noncumulative guaranteed trust preferred securities (NYSE: RBSPG) gained a nickel to end at $13.08, while the 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) increase 4 cents to $16.88.

Citigroup Inc.'s 7.875% fixed-to-floating trust preferreds (NYSE: CPN), however, dropped 7 cents to $26.59.

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