KeyCorp’s new preferreds trade off with market; Saratoga on tap; Teekay dips, Scorpio up

By Stephanie N. Rotondo

Seattle, Dec. 12 – The preferred stock market was losing ground in Monday trading.

The Wells Fargo Hybrid and Preferred Securities index declined 48 basis points by the end of business. The index was off 33 bps at mid-morning.

The weakness even invaded KeyCorp’s $500 million of 6.125% series E fixed-to-floating rate noncumulative perpetual preferred stock, an issue that has performed rather well since pricing Dec. 5.

The preferreds closed off 8 cents at $25.32. The paper was down 12 cents in early dealings at $25.48.

The deal came upsized from $250 million and tighter than the 6.25% price talk.

It is trading under a temporary ticker, “KYYPP.”

In the primary market, Saratoga Investment Corp. said it was bringing a $55 million offering of $25-par seven-year notes, a market source said.

Price talk is 6.75%, according to the source. The paper, which is non-callable for three years, “probably won’t price until Tuesday,” he added.

Ladenburg Thalmann & Co. Inc., BB&T Capital Markets, Compass Point and William Blair & Co. are running the books.

Proceeds from the offering will be used to take out a portion of the 7.5% $25-par notes due 2020 (NYSE: SAQ).

That issue declined a dime to $25.20.

Teekay drops, Scorpio rises

A trader said that oil shipping companies were “getting hit because of [Saudi Arabia’s] comments on oil production.”

The comments indicated that the country was willing to make deeper production cuts than those agreed to at a recent OPEC meeting that resulted in an agreement to stem output.

Teekay LNG Partners LP’s 9% series A cumulative redeemable preferred units (NYSE: TGPPA) slid 92 cents, or 3.89%, to $22.73.

However, Scorpio Bulkers Inc.’s 7.5% $25-par notes due 2019 (NYSE: SLTB) rose 60 cents, or 2.7%, to $22.72.

Those gains came as the company said its board of directors had authorized the repurchase of up to $20 million of the notes.

Over the weekend, it was announced that 11 oil producers had agreed to join’s OPEC’s output cut aimed at reducing production by 600,000 barrels per day.

The official tally as of the weekend placed the expected reduction at 558,000 bpd, but the market was still hopeful the move would stem a global oversupply of crude. Also, it’s the first deal of its kind in the last 15 years.

For its part, OPEC’s agreement will reduce output by 1.2 million bpd within the cartel.

Under the OPEC deal, Saudi Arabia agreed to reduce production by 486,000 bpd. However, the country has expressed a willingness to cut back even more if necessary.

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