New issue market picks up, two deals announced Monday; RBS trending higher on dividend halt

By Stephanie N. Rotondo

Portland, Ore., April 11 - A trader said it was a "mostly red" day for the preferred stock market on Monday, though he added that things were "not off by a lot."

The new issue market continued to speed up. Two new deals were announced on Monday alone. One was from Ashford Hospitality Trust Inc. and the other from Entergy Mississippi Inc.

Traders said both new issues were on the smaller size and neither was doing well in the gray market.

One trader said that while he was in New York last week, he heard "rumors that we are going to see a busier new issue market." At least two new deals came last week as well, and both of those were from real estate investment trusts.

"The vast majority of new issuance is out of REITs," another trader said.

Meanwhile, Royal Bank of Scotland plc's preferreds were continuing to trade mostly better. A trader had seen some action in the shares on Friday and attributed it to the belief that new banking regulations in the United Kingdom will not be as restrictive as once thought. On Monday, a trader gave credit to an article published in Barron's on Saturday discussing RBS' dividend-suspension program.

Ashford bringing new deal

Dallas-based REIT Ashford Hospitality Trust said it plans to issue series E cumulative preferred stock in order to raise proceeds to pay down other debt and to redeem its series B-1 convertible preferreds.

A trader said he heard price talk at 8.875%, with about 2 million shares being sold.

Another trader said the new series of preferreds was being offered at less 40, or $24.60.

The first trader said Ashford's existing issues were "all trading around par" and saw the series D 8.45% preferreds at $24.50.

Citigroup Global Markets Inc., Merrill Lynch and UBS Securities LLC are the joint bookrunners for the new issue. Deutsche Bank Securities Inc. and Stifel, Nicolaus & Co. Inc. are the senior co-managers. Robert W. Baird & Co. Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) Inc., FBR Capital Markets and KeyBanc Capital Markets LLC are the co-managers.

Entergy to sell mortgage bonds

Entergy Mississippi is also planning a new issue in order to raise funding for a redemption, the company announced.

Entergy said it will sell 4 million, or $100 million, of new first mortgage bonds at par of $25.00. A trader said "they will probably grow it."

Price talk on the bonds (Baa1/A-) is 6% to 6.125%. The bonds mature May 1, 2051.

A trader said the issue was faring "kind of mediocre to poor," seeing markets of $24.70 bid, $24.75 offered in the gray market.

Wells Fargo Securities LLC, Citigroup and Morgan Stanley & Co. Inc. are the joint bookrunners. Morgan Keegan & Co. Inc. and Stephens Inc. are the co-managers.

Funds from the sale will be used to help repay $480 million of 4.65% debt coming due in May and to redeem up to $75 million of the company's 6% debt due 2032.

Entergy is an electricity provider based in Jackson, Miss.

RBS up on dividend halt

Royal Bank of Scotland's preferreds were trending upward, for the most part, as the Edinburgh-based bank's dividend-suspension program got underway.

One trader pointed to an article in Barron's published Saturday in which market sources said the suspension could cause the preferreds to gain as much as 17% over the next year.

Another trader said the series E 5.90% preferreds were up the most and the most actively traded of the RBS issues, seeing it close at $15.94, up 58 cents.

The series G 6.08% preferreds improved by 46 cents, closing at $15.94, and the series I 6.25% preferreds finished 53 cents better at $16.08.

"The market viewed it as favorable overall," the trader said, though he noted that some issues were a bit weaker.

In 2009, RBS received state aid in return for an 85% stake in the firm. However, unlike other banks, RBS kept paying out dividends. This in turn upset the European Union Competition Committee, which ordered RBS to halt the payments.

April 1 was the beginning date for the two-year restriction on the series E, G and I preferreds.

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