PS Business Parks plans new issue; Fannie, Freddie slide, see 'crazy trades'; RBS climbs again

By Stephanie N. Rotondo

Portland, Ore., May 2 - It was a mixed day for preferred stocks on Wednesday, and trading remained focused on new issues and Royal Bank of Scotland Group plc.

Fannie Mae and Freddie Mac preferreds were also getting a fair bit of action, and the firms saw "crazy trades," according to a trader.

In new deals, PS Business Parks Inc. announced plans to sell series T cumulative perpetual preferred stock. Traders said that pricing was tightened during the session and there was also chatter that the deal was being upsized.

PS Business plans new deal

PS Business Parks will sell series T cumulative perpetual preferred stock, the company said in a regulatory filing Wednesday.

The securities will be issued as depositary shares representing a 1/1,000th interest in a preferred. The liquidation preference will be $25,000 per preferred, or $25 per depositary share.

A trader said the deal was "doing well," hearing that price talk was revised to 6% from 6.125% and that the deal was increased from 4 million shares to 8 million.

"It's the second largest REIT next to Public Storage," he added.

The trader said the paper closed at $24.85 in the gray market, down from earlier levels around $24.90.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC are the joint bookrunners.

The company will apply to list the preferreds on the New York Stock Exchange under the ticker symbol "PSBPT."

Proceeds will be used for general corporate purposes, including the repayment of outstanding debt, the redemption of preferreds and the acquisition of commercial properties.

PS Business Parks is a Glendale, Calif.-based real estate investment trust.

Fannie, Freddie come in

Fannie Mae and Freddie Mac preferreds saw the most trading in the preferred stock market, at least in terms of the number of preferreds sold, a market source said.

Another trader said "everybody was talking about" the action given that there were some "crazy trades."

"Nobody knows where they came from or who they went to," he said.

The market source opined that the trades were probably made by "some quirky high yield guy."

Both Fannie Mae's 8.25% fixed-to-floating-rate series S noncumulative preferreds (OTCBB: FNMAS) and Freddie Mac's 8.375% fixed-to-floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) traded as low as 75 cents on the day. Fannie's preferreds ended the day at $1.12, down 7 cents, or 5.88%, while the Freddie issue closed at $1.14, down 4 cents, or 3.39%.

More than 30 million of the Fannie preferreds changed hands, while 27 million of the Freddie preferreds turned over.

RBS climb continues

With only days left until the Edinburgh-based bank's quarterly conference call, Royal Bank of Scotland preferreds continued to trade active and higher during the midweek session.

The 5.9% noncumulative guaranteed trust preferreds (NYSE: RBSPE) gained a penny, closing at $14.32, and the 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) closed up a dime at $17.30. The 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) - the most active issue of the RBS complex - gained 16 cents, finishing at $19.28.

On Friday, RBS will hold its quarterly conference call in which it is expected that the company will provide an update on its preferred dividends. The belief is that the bank will announce that it will turn on dividends for securities that recently ended their mandatory no-pay period.

Trader: Prospect Capital to pop

A trader was enthusiastic about Prospect Capital Corp.'s $100 million issue of 6.95% $25-par senior notes due Nov. 15, 2022, an issue that priced April 24.

"It's still trading under par," he said. "I think this is going to be a popper."

But another source was not as excited about the deal, which he noted his firm had done little with.

The problem, as he saw it, was that "it's somebody you've never heard of, which is a bit problematic."

The deal has not yet listed, but the source said the notes closed at $24.92 bid, $24.94 offered. He added that there were a few trades at par or above during the trading day.

Prospect Capital is a New York-based financial services company that primarily lends to and invests in middle-market privately held companies.

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