State Street sells upsized $750 million fixed-to-floating noncumulatives; Allstate frees

By Stephanie N. Rotondo

Phoenix, Feb. 25 - The preferred stock market "kind of bounced around," a market source said of Tuesday's session.

As of midday, the Wells Fargo Hybrid and Preferred Securities index was down just 1 basis point. By the close, it had come back to end up just 2 bps.

State Street Corp. kept the primary market churning as the Boston-based bank announced an offering of series D fixed-to-floating rate noncumulative preferreds.

A trader said price talk was around 6.25%, though he heard it could be tightened.

"There's no selling group," he added at the time, suggesting it would be a "tiny deal."

Early in the session, he saw a gray market bid at $24.80, though that then moved up to $24.95.

However, that "tiny deal" grew substantially, coming upsized at $750 million to yield 5.9%.

"Supposedly there was a lot of demand for it," a market source said, noting that it was "not a very common name in our market, but it's a good name."

The fact that it was a fixed-to-float issue "helps... a lot."

But even with growing the deal to a benchmark size, the source said he was hearing that allocations were tough to come by. He heard some accounts say that they only got a quarter of what they wanted.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, Goldman Sachs & Co. and Wells Fargo Securities LLC are the joint bookrunners.

Proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, potential acquisitions, investments or loans to subsidiaries, refinancing of outstanding obligations, share repurchases or dividends.

As for the bank's existing 5.25% series C noncumulative perpetual preferreds (NYSE: STTPC), that issue will go ex-dividend on Wednesday, giving preferred holders an additional 32.81 cents per share.

The issue ended the day down 13 cents at $22.45.

Meanwhile, the Allstate Corp.'s $650 million of 6.625% series E noncumulative preferreds - a deal that came Monday - was quoted at $24.78 bid, $24.80 offered around midday.

A market source said the issue freed to trade around noon ET and that the new shares did "quite well."

He saw a $24.74 bid for paper after it freed.

Morgan Stanley, BofA Merrill Lynch, Goldman Sachs, J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo led that offering.

Among other recent deals from insurance companies, Kemper Corp.'s $150 million of 7.375% $25-par subordinated debentures due 2054 were pegged at $25.05 bid, $25.12 offered.

The notes came Thursday via JPMorgan and Wells Fargo.

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