New issues close out week mixed; CommonWealth REIT prices new notes; RBS gives up gains again

By Stephanie N. Rotondo

Phoenix, July 20 - Stanley Black & Decker Inc.'s new $750 million issue of 5.75% $25-par junior subordinated notes due 2052 continued to trade well in Friday's preferred stock market.

"It's doing very well," a trader said.

Some other recent deals, however, were not faring as well, like Senior Housing Properties Trust's $350 million of 5.625% $25-par senior notes due Aug. 1, 2052.

"They're really pushing prices," a trader said, referring specifically to CommonWealth REIT. He spoke ahead of the company pricing its $25-par senior notes due Aug. 1, 2042, which were talked around 5.75%.

The issue priced after Friday's close, coming upsized at $175 million and in line with price talk. However, ahead of pricing, chatter was that the deal was not all that attractive.

In secondary dealings, it remained the Royal Bank of Scotland Group plc show. The preferreds were again declining, as they were on Thursday after running up steadily for the last couple of weeks.

New issues end week mixed

Black & Decker's new 5.75% $25-par notes were pegged at $25.25 bid, $25.32 offered, which was about in line with where they closed Thursday.

The deal priced Wednesday.

But even as Black & Decker was faring well - a trader opined that investors were clamoring for that paper given that it was not a financial nor a real estate investment trust - other recent issues were not as lucky.

Senior Housing Properties' 5.625% $25-par senior notes fell off again Friday, with a trader pegging the issue at $24.15. The notes priced Tuesday.

Even Invesco Mortgage Capital Inc.'s offering of $135 million 7.75% series A cumulative redeemable preferreds - a deal that priced Thursday after the close - wasn't doing so hot. A trader said he had seen a $24.60 bid for paper.

CommonWealth brings deal

CommonWealth REIT brought a $175 million issue of 5.75% $25-par senior notes due Aug. 1, 2042 on Friday.

The deal was upsized from $150 million.

Traders reported seeing no markets for the new issue. That should come as little surprise, as some were already deeming the deal a dud ahead of pricing.

In an article posted on Seeking Alpha Friday, Michael Terry, a consultant with Rubicon Associates LLC, said that CommonWealth's new bond deal is not attractive, pointing to the fact that the company's cash flow from operations is declining.

"If it is declining when it should be turning around and increasing, there is an issue," he wrote. "I see no catalyst which will turn this trend around in the near term and therefore, no reason to invest as the yield indeed seems like the cheese in the mousetrap."

Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunning managers. The joint lead managers are Jefferies & Co. Inc. and RBC Capital Markets LLC.

Proceeds will be used to repay outstanding amounts under a revolving credit facility and for general corporate purposes, which may include future acquisitions.

After paying down the credit facility, the Newton, Mass.-based REIT intends to use the available borrowings to redeem some or all of its outstanding 7.125% series C cumulative redeemable preferreds.

RBS preferreds lose again

Most of the Royal Bank of Scotland preferred complex ended Friday's session on a softer note with one exception.

The 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) were down 45 cents, or 2.05%, at $21.55 at midday. By the day's close, however, the preferreds were trading up 20 cents, or 0.91%, at $22.20.

RBS had been steadily climbing higher over the last few weeks ahead of the Edinburgh-based bank's addition to Standard & Poor's preferred stock index on Friday. Investors were snatching up paper, and market players opined that it was specifically broker-dealers looking for an opportunity as well as possibly a large exchange-traded fund in California that bases its fund on the S&P index.

But all that changed Thursday, as the preferreds started to decline. Profit-taking was blamed for at least part of the losses.

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