Gladstone Investment sells upsized term preferreds; Deutsche Bank paper trends weaker

By Stephanie N. Rotondo

Seattle, Sept. 19 – The preferred stock new issue pipeline again started to flow on Monday, with Gladstone Investment Corp.’s $50 million offering of 6.25% series D cumulative term preferreds.

Initial price talk was in the 6.375% area, a market source said of the Janney Montgomery Scott LLC-led deal. The company originally planned to sell $35 million of the preferreds.

A trader placed the issue around $24.85 prior to pricing.

The McLean, Va.-based real estate investment trust plans to use the proceeds to redeem its outstanding 7.125% series A cumulative term preferreds (Nasdaq: GAINP). On that news, the series A preferreds were trading off 56 cents, or 2.17%, at $25.27.

The series A preferreds – a $35 million issue sold on Feb. 29, 2012 – became callable on Feb. 28 of this year. The issue matures on Feb. 28, 2017.

The new preferreds become mandatorily redeemable on Sept. 30, 2023 at par plus accrued dividends. If the paper is not redeemed by that date, the dividend increases by 3%.

The company must also call the issue in the event of a change of control, or if the asset coverage ratio falls below 200%.

The preferreds become optionally redeemable on or after Sept. 30, 2018, also at par plus accrued dividends.

Away from new issues, the preferred stock market was finding a footing in Monday trading, after trading mostly weaker the previous week.

The Wells Fargo Hybrid and Preferred Securities index finished the day up 21 basis points. The index was up 40 bps at mid-morning.

For the week, the markets are keeping an eye on the Federal Reserve, which is slated to make its latest monetary policy announcement on Wednesday. It is expected that the central bank will hold interest rates steady for now, though a rate hike could still come in December.

Deutsche Bank paper active

While the secondary was trending more positive for the session, Deutsche Bank AG’s paper continued to trade largely softer.

The 7.6% trust preferred securities (NYSE: DTK) were down 3 cents at $25.37 in early trading, though they closed off just a penny at $25.39. The 8.05% TruPS (NYSE: DKT) were initially a penny lower at $26.20 but ultimately ended up 17 cents at $26.38.

The 6.55% TruPS (NYSE: DXB) were meantime up 9 cents at $24.84 at mid-morning, but came in to close down 14 cents at $24.61.

The German bank’s preferreds started to drop on Friday after it was announced that the company had rebuffed a $14 billion settlement proposal from the U.S. Justice Department. The settlement was in relation to the bank’s role in the subprime mortgage crisis that roiled the global economy.

However, Deutsche did concede that it was willing to negotiate the settlement amount, aiming for a figure more in line with what other large banks had been fined.

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