Primary market active with issues from U.S. Bancorp, Stifel; Hudson Pacific plans add-on deal

By Stephanie N. Rotondo

Portland, Ore., Jan. 18 - The preferred stock market had a firm tone to it Wednesday, helped in part by another round of new issues.

"[New issues] were kind of dominating," a trader said. Outside of the primary market, he said, it was "quiet."

U.S. Bancorp priced fixed-to-floating series F noncumulative perpetual preferreds after the bell. A trader said he was already seeing quotes above par.

A new issue from Stifel Financial Corp. was also "going pretty well," the trader said. The financial services firm sold $25-par senior notes due 2022.

Also, Hudson Pacific Properties Inc. said during the midweek session that it will price an add-on to its 8.375% series B cumulative redeemable perpetual preferreds. The outstanding preferreds ended the day stronger.

First Republic Bank's new deal, a $199.53 million issue of 6.7% series A noncumulative perpetual preferreds that priced Tuesday, was trading at levels above par.

Away from new issues, Deutsche Bank AG's preferreds were mixed on new that it reached a $55 million settlement with M&T Bank. M&T had sued Deutsche Bank about a pool of collateralized debt obligations that it purchased in 2007. The bank eventually lost $82 million because of the investment.

Ally Financial Inc. was meantime higher despite word that lawsuits previously brought against it by Financial Guaranty Insurance Co. were moved to a federal court.

U.S. Bancorp deal pops

U.S. Bancorp sold $1.1 billion of fixed-to-floating series F noncumulative perpetual preferreds, the company said in a regulatory filing.

Price talk was around 6.625%, a trader said. The deal came at 6.5%.

"It was priced really tight," he said. "There's no syndicate on it, nobody can get shares."

He saw the issue trading at $25.10 in the gray market.

When declared by the board of directors, dividends will be payable quarterly. The dividend rate will be fixed until Jan. 15, 2022, at which time the dividend will be Libor plus 446.8 basis points.

The preferreds will be issued as depositary shares representing 1/1,000th of an interest in the series F preferreds. The liquidation preference is $25,000 per preferred.

The Minneapolis-based bank has the option to redeem the preferreds after Jan. 15, 2022 at par plus declared dividends. The preferreds can be redeemed prior to Jan. 15, 2022 in the event of a "regulatory capital treatment event."

Morgan Stanley & Co. LLC, Goldman Sachs & Co. and U.S. Bancorp Investments Inc. are the joint bookrunners.

Proceeds will be used for general corporate purposes, including the redemption of some callable trust preferreds.

Stifel sells baby bonds

Stifel Financial also announced plans for a deal, which - like U.S. Bancorp - came after the market closed.

The St. Louis-based firm said it issued $175 million of 6.7% $25-par senior notes due Jan. 15, 2022. A trader said price talk was 6.75%.

"It's going pretty well," he said, seeing a less 10 bid for the paper in the gray market.

Interest will be payable quarterly.

The company has the option to redeem the notes, in whole or in part, beginning Jan. 15, 2015 at par plus accrued interest.

Stifel, Nicolaus & Co. Inc., Bank of America Merrill Lynch, Morgan Stanley and UBS Securities LLC are the joint bookrunners. U.S. Bancorp Investments Inc. is the co-manager, and Credit Suisse Securities (USA) LLC is the joint lead manager.

Proceeds will be used for general corporate purposes.

Hudson to bring add-on

Hudson Pacific Properties is reopening its 8.375% series B cumulative redeemable perpetual preferreds, according to a regulatory filing.

There was $87.5 million of the preferreds outstanding as of Tuesday. The preferreds (NYSE: HPPPB) closed up 25 cents at $26.50.

Dividends are payable quarterly.

There is a change of control and/or delisting clause that allows holders to receive cash dividends at an increased rate of 12.375%.

The preferreds become redeemable at the company's option on Dec. 20, 2015 or in the event of a change of control.

Wells Fargo Securities LLC, Bank of America Merrill Lynch and Barclays Capital Inc. are the bookrunners.

Proceeds will be contributed to the company's operating partnership in exchange for 8.375% series B cumulative redeemable preferred units. The operating partnership will then use the funds to repay debt under a secured revolving credit facility.

Hudson Properties is a Los Angeles-based real estate investment trust.

First Republic fares well

Among other new deals, First Republic's $199.53 million issue, which priced Tuesday, was trading "a little above par," according to a market source.

The San Francisco-based private bank and wealth management company issued the 6.7% series A noncumulative perpetual preferreds as depositary shares representing 1/40th of an interest in a preferred. The depositary shares were sold at $25 each.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Morgan Stanley were the bookrunners.

Proceeds will be used for general corporate purposes, including the redemption of First Republic Preferred Capital Corp.'s 10.5% series A noncumulative perpetual preferreds and 7.25% series D noncumulative perpetual preferreds. As previously reported, a trader said the company is required to redeem the 7.25% preferreds if it calls the 10.5% preferreds.

Deutsche Bank ends mixed

Deutsche Bank reached a settlement with M&T Bank on Wednesday regarding the sale of CDOs by Deutsche Bank to M&T in 2007.

The investment, which was tied to subprime mortgages, resulted in an $82 million loss for M&T.

Deutsche Bank was among the most actively traded preferreds of the day, although overall, the structure was mixed.

The 7.6% trust preferreds (NYSE: DTK) and 6.625% noncumulative trust preferreds (NYSE: DTT) were both up, the former up 15 cents at $25.32 and the latter up 21 cents at $21.82.

But the 6.5% 2011 series I junior subordinated debenture due 2061 (NYSE: DTZ) - 1.23 million of which traded - fell 26 cents to $26.78.

M&T filed the lawsuit in 2008. The case has been watched closely by the market as it was one of the first of many suits that came out of the financial crisis.

Deutsche Bank had claimed that the lawsuit was uncalled for, stating that M&T was a sophisticated investor that knew the risks it was taking. M&T, for its part, claimed that Deutsche Bank had misled the bank regarding the quality of the investment.

Firm market helps Ally

In another mortgage securities case, Financial Guaranty Insurance Co. lawsuits against Ally Financial were moved to federal court, according to news reports.

Ally's preferreds were not losing any ground on the news.

The 8.125% fixed-to-floating rate series 2 trust preferreds (NYSE: ALLYPA) closed up 20 cents at $21.45, while the 8.5% fixed-to-floating rate series A perpetual preferreds (NYSE: ALLYPB) gained 28 cents, or 1.38%, to end at $20.40.

Nearly 3 million of the latter preferreds changed hands.

Financial Guaranty brought the lawsuits against Ally on Dec. 27, alleging that the company made "material misrepresentations" about loans it guaranteed. Housing-market related losses forced the holding company, FGIC Corp., into bankruptcy in August 2010.

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