Midday Commentary: New deal flow continues as Ares plans sale, secondary 'choking'

By Andrea Heisinger

New York, Sept. 20 - Another new preferred stock deal was in the market on Thursday as the secondary market showed signs of fatigue from all the supply coming in.

Preferred stock announced Wednesday by AG Mortgage Investment Trust Inc. was priced Thursday morning.

The New York-based real estate investment trust sold $100 million, or 4 million shares, of 8% $25-par series B cumulative redeemable perpetual preferreds, according to an FWP filing with the Securities and Exchange Commission.

The shares were priced in line with talk.

There is an overallotment option of 600,000 shares.

The company will apply to list the new securities on the New York Stock Exchange.

Proceeds will be used to enhance liquidity, to acquire additional credit investments and for general corporate purposes.

Stifel Nicolaus & Co. Inc., RBC Capital Markets LLC, Barclays and Deutsche Bank Securities Inc. are the joint bookrunners.

A trader said the $450 million of new 5.5% subordinated debentures due 2052 from Aflac Inc. were "showing up in a lot of shares" as of late morning in the New York session after being freed for the secondary. They were priced on Wednesday at par of $25. About 1.618 million shares were seen trading, the trader said.

"I'm seeing them at par now, but the range has been $24.70 to par," he said. The volume-weighted average for the Aflac shares was $24.77 which is "more indicative of where the market really is," the trader said.

Ares announces $25-par deal

Los Angeles-based specialty finance company Ares Capital Corp. announced plans for $100 million of $25-par 10-year senior notes (/BBB/BBB), a market source said.

The notes are being talked in the 5.875% to 6% coupon area. The deal could be priced later Thursday or Friday morning.

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

A $125 million sale of 6.5% $25-par 30-year senior notes priced Tuesday by Argo Group US Inc. was last seen trading at $24.79 as of late morning in the New York session, a trader said.

"It's traded above par," he added.

The notes had been quoted at $24.70 as of midafternoon Wednesday.

Argo has applied to list the notes on Nasdaq under the symbol "AGIIL."

Argo is a Hamilton, Bermuda-based underwriter of specialty insurance and reinsurance.

Market weaker

The preferred stock market was seen "off a touch" or a few pennies as of midday Thursday, a trader said.

He added that "everybody's been pushing" to get deals priced and that all of the new supply of shares has been "choking in the secondary."

"There's too much volume for the dealers' books," he said.

In the U.S. dollar preferred stock market, you'd "almost have to be an idiot to put an offer in at par," the trader said, adding that most investors would be better off waiting until shares cheapen by a quarter.

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