Trader says preferred market focused on State Street, Capital One; Reinsurance Group upsizes

By Stephanie N. Rotondo

Phoenix, Aug. 14 - It was indeed looking like a busy week for new issues, as new deals from Capital One Financial Corp., Regency Centers Corp., State Street Corp. and Reinsurance Group of America Inc. priced.

Capital One priced its new deal late Monday, an $875 million offering of 6% series B fixed-rate noncumulative perpetual preferred stock. The deal came in line with talk and freed up during Tuesday's session.

Regency Centers then priced another 6% deal early Tuesday. The company said it was issuing $75 million of 6% series 7 cumulative redeemable perpetual preferred shares.

The deal was not getting much play.

Investors were interested, however, in State Street's sale of series C noncumulative perpetual preferred stock. The deal priced at the tight end of talk late in the day, with $500 million preferreds being sold.

Also, Reinsurance Group offered $400 million of 6.2% fixed-to-floating-rate subordinated debentures due Sept. 15, 2042. Like State Street, it priced later in the day.

"Everybody is focusing on State Street and Capital One," a trader remarked.

Secondary dealings were deemed non-too-spectacular.

"Secondary volume was slow," a trader said, noting that the day's most liquid issues were recent deals.

Optimism for Capital One

Capital One issued $875 million of 6% series B fixed-rate noncumulative perpetual preferreds late Monday.

Come midday Tuesday, a trader saw the issue trading at $24.90. He also said the issue was expected to free from the syndicate at 1:30 p.m. ET.

After the bell, a trader said the paper had come in to $24.85 bid, $24.88 offered. He attributed the slip to "technical in a new deal" and opined that the day's performance was not indicative of the deal's future.

"It's short term," he said. "I think it will perform [well] going forward."

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunners. The co-managers are Barclays, Deutsche Bank Securities Inc., Goldman Sachs & Co. and RBS Securities Inc.

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

Capital One is a McLean, Va.-based financial holding company.

State Street 'attractive'

State Street announced and then priced a $500 million sale of 5.25% series C noncumulative perpetual preferred stock on Tuesday.

A trader said that it "could be pretty attractive," noting that the credit is "a good name."

Paper was trading at $24.93 in the gray market ahead of pricing. Post-pricing, the preferreds were pegged in the same zip code.

Morgan Stanley, Bank of America Merrill Lynch, Goldman Sachs, UBS and Wells Fargo are the joint bookrunning managers for the State Street deal.

Proceeds will be used to redeem all of the company's outstanding series A preferred stock from State Street Capital Trust III. The trust will then redeem all outstanding 8.25% fixed-to-floating-rate normal automatic preferred enhanced capital securities and all of its outstanding common securities.

The redemptions require approval from the Federal Reserve. If approval is not secured, the company will use proceeds for general corporate purposes.

State Street is a Boston-based financial holding company.

Reinsurance deal upsized

Reinsurance Group of America brought a $400 million offering of 6.2% fixed-to-floating-rate subordinated debentures due Sept. 15, 2042.

The deal was originally slated to be $300 million.

A trader said he saw a $24.95 bid for paper, though he added that there "wasn't really any offers."

The interest rate will be fixed through Sept. 15, 2022. After Sept. 15, 2022, the interest rate will convert to a floating rate equal to Libor plus 447 basis points. The rate will be reset quarterly.

Throughout the life of the notes, interest will be payable on the 15th day of March, June, September and December. The first interest payment date is Dec. 15.

The company will apply to list the notes on the New York Stock Exchange.

Barclays, UBS and Wells Fargo are the joint bookrunning managers.

Proceeds will be used for general corporate purposes.

Reinsurance Group is a Chesterfield, Mo.-based reinsurance company.

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