U.S. Bancorp dominates early primary trading; Saratoga, Tsakos eye new deals for this week

By Stephanie N. Rotondo

Phoenix, April 29 - The primary preferred stock market was roaring to start off the week, and an expected deal from U.S. Bancorp was leading the way.

"That's been dominating the day," a trader said of the bank's proposed offering of series H noncumulative perpetual preferreds.

Initial price talk was around 5.25% but was revised at midday to 5.15%.

Meanwhile, Saratoga Investment Corp. said it would sell up to $40.25 million of $25-par notes due May 31, 2020, and Tsakos Energy Navigation Ltd. intends to price a minimum of $50 million of series B cumulative redeemable perpetual preferreds.

Both issues were expected to price later in the week.

Overall, the preferred stock market was up as much as 10 cents on average for the day, though one market source said that "seems a little aggressive," suggesting that it was more like 7 cents. Volume was light, but not as light as Mondays typically tend to be.

U.S. Bancorp prices

U.S. Bancorp announced and then priced a $500 million offering of 5.125% series H noncumulative perpetual preferreds on Monday.

A trader said ahead of the revision to price talk that the preferreds were being quoted at $24.93 bid, $24.97 offered in the gray market. He noted that he expected the change would "probably bring that in at little bit."

Still, even with the downward revision, he remarked that the deal "should still do fine.

"It's one of the few investment-grade preferreds left out there," he said, especially given how many issues have been called of late. "This should be soaked up pretty quick."

After pricing, a market source said the deal was "doing quite well," seeing a par bid, $25.05 offered market.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC are the joint bookrunning managers.

The Minneapolis-based bank intends to use the proceeds for general corporate purposes, which may include the redemption of the 7.875% series D noncumulative perpetual preferreds.

Saratoga, Tsakos get ready

New York-based Saratoga Investment was marketing a sale of $25-par notes due 2020 on Monday.

A trader said price talk was around 7.5% and that pricing was expected later this week.

"They're still in the market process," he said, speculating that the deal would come Wednesday or Thursday. He added that the deal was expected to be only $25 million.

Tsakos Energy was meantime also talking a new issue of preferreds during the session.

That "tiny deal" was being talked around 8%, according to a trader.

The trader saw a less 30-cent offer for paper in the midday gray market.

The deal will include a dividend step-up feature. Like Saratoga, the deal was expected to price later in the week.

"It's going to be awhile," said a source familiar with the Tsakos deal. He speculated pricing would come Tuesday of Wednesday.

Goldman lists

As for recently priced deals, Goldman Sachs Group Inc.'s 5.5% series J fixed-to-floating rate noncumulative preferreds - a $1 billion deal that priced April 18 - listed on the New York Stock Exchange on Monday.

The ticker symbol is "GSPJ." The issue was trading at $25.53 at midday, up 8 cents.

At the close, the paper was up 12 cents at $25.57. However, another market source called the issue flat at $25.56.

The preferreds topped the day's most actively traded list.

MPG dives

MPG Office Trust Inc. took a massive hit Monday, as the market learned that the company and its board were being investigated regarding a sale of the company announced last week.

The 7.625% series A cumulative redeemable preferreds (NYSE: MPGPA) dropped 95 cents, or 3.41%, to $26.90.

Last week, MPG announced that it had agreed to a buyout by Brookfield Office Properties Inc. for $3.15 per common share and $25.00 per preferred share. However, both issues were already trading at premiums to those amounts. The investigation by an unnamed law firm intends to look into whether or not the company's directors or its board breached their fiduciary duties by agreeing to such terms.

Still, a market source noted that "the reality is that [the preferred stock] is callable so it shouldn't have been trading that high anyway," though the security's distribution is currently suspended.

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