NextEra's new $25-par notes free to trade; American Financial to list; KeyCorp calls TRUPs

By Stephanie N. Rotondo

Phoenix, June 13 - The preferred stock market was "basically flat" during Wednesday trading, according to a market source.

Another source noted that it was a "pretty quiet day" as the market watched JPMorgan Chase & Co. chief executive officer Jamie Dimon testify before a Senate committee. Investors were also keeping a weary eye on Europe.

In the primary, NextEra Energy Capital Holdings Inc.'s $325 million of 5.625% series H junior subordinated 60-year notes freed from the syndicate, according to a trader. On the break, the notes were trading significantly higher.

Meanwhile, American Financial Group Inc.'s $200 million offering of 6.375% $25-par senior notes due June 12, 2042 - a deal that priced June 7 - is expected to list on the New York Stock Exchange on Thursday.

KeyCorp was the latest to jump on the redemption bandwagon. It announced late Tuesday that it will redeem its 8% enhanced trust preferreds and its 5.7% TRUPs, citing the Federal Reserve's new capital treatment rules as a regulatory capital treatment event. KeyCorp joined other banks such as Citigroup Inc. and JPMorgan in the recent redemption craze.

"There's been over $15 billion in calls announced," a source noted. "There's going to be a lot of cash taken out of the market." As cash flows out, that "will drive prices higher."

Rumor has it that the new issue calendar will pick up in the next week or so. One trader said he heard that a few banks were planning new deals as early as next week.

"We're expecting a pretty high-volume summer in the primary," a source said.

NextEra frees up

NextEra Energy Capital Holdings' new 5.625% $25-par series H junior subordinated debentures due June 15, 2072 freed from the syndicate Wednesday.

After the deal priced Tuesday, it was trading with a $24.65 handle.

The paper moved up on the break. Around midday, a trader placed the issue at $24.85. After the close, a source said that the notes closed at $24.82 and that more than 1.55 million notes changed hands.

The source noted that there were "a bunch of smaller trades" above par, with highs around $25.40. Most of the trades, he added, were around the $24.80 mark.

NextEra Energy Inc. will unconditionally and irrevocably guarantee the notes.

The company is applying to list the notes on the New York Stock Exchange. Settlement is expected Friday.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC were the joint bookrunning managers. Raymond James & Associates Inc. and RBC Capital Markets LLC were the co-managers.

Proceeds from the offering will be contributed to NextEra's general fund. The company will then use the funds to repay a portion of its commercial paper obligations and for other general corporate purposes.

NextEra is a Juno Beach, Fla.-based energy provider.

American Financial to list

American Financial's 6.375% $25-par senior notes due 2042 are expected to list on the NYSE on Thursday.

On Wednesday, a trader said the paper was "breaching par," trading at $25.03.

Bank of America Merrill Lynch, UBS and Wells Fargo were the joint bookrunners on the deal.

Proceeds from the sale will be used along with cash on hand to redeem $112.5 million of 7.5% senior notes due November 2033 and $86.25 million of 7.25% notes due January 2034. Any remaining proceeds will be used to partially redeem the company's 7.125% senior debentures due 2034, of which $115 million is outstanding.

Proceeds will also be used for general working capital purposes.

American Financial Group is a Cincinnati-based insurance company.

KeyCorp issues call

KeyCorp joined fellow banks Citigroup and JPMorgan in announcing redemptions of trust preferreds.

The Cleveland-based bank said in an 8-K filing with the Securities and Exchange Commission late Tuesday that it will redeem its 8% enhanced trust preferreds and its 5.7% TRUPs, citing the Federal Reserve's new capital treatment rules as a regulatory capital treatment event.

On the news, the 8% TRUPs (NYSE: KEYPF) fell 8 cents to close at $25.11.

Citi and JPMorgan's recently called issues meantime were trading actively again.

Citi's 8.5% fixed-to-floating series J trust preferreds (NYSE: CPJ) lost a penny, closing at $25.59. JPMorgan's 8% fixed-to-floating series Z capital securities (NYSE: JPMPZ) declined 2 cents to $25.28, and the 7.2% series BB fixed-to-floating capital securities (NYSE: JPMPB) were flat at $25.51.

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