Charles Schwab, Aegon give talk; Gladstone plans preferreds; recent deals hold in trading

By Andrea Heisinger

New York, Jan. 23 - The primary side of the preferred stock market saw an influx of new offering announcements on Monday from Charles Schwab Corp., Aegon NV and Gladstone Commercial Corp.

The market was initially up at the open but lost gains by the afternoon.

"The market popped up in the first hour, I would say by 50 basis points, but it ended up about 24 bps," a trader said after the close. Preferreds ended up 6 cents overall on the day.

Aegon has the potential to be a large offering, sources said. The talked size is $250 million.

"When I first heard about Aegon, I thought they'd do a senior note structure," a trader said. Instead, the company is opting to price $25-par noncumulative subordinated notes.

"With that 8 [percent talk] handle, they'll have no problem getting it sold," the trader added.

Charles Schwab will sell fixed-to-floating-rate perpetual preferreds that are noncumulative.

Gladstone Commercial wasn't on the radar in the early afternoon, as a source said he hadn't seen it launch. The real estate investment trust is planning to sell 1 million shares of cumulative preferreds at $25 each.

The Schwab deal was less attractive to one trader than the one from Aegon, partly for the latter's coupon.

"At 7% on a [dividends received deduction], I'd rather look at others in the secondary," the trader said.

Traders saw relatively low volume despite the number of new deals being announced and the issues that priced last week.

"Other than one or two issues, [volume's] pretty low," one source said.

Another source said earlier in the afternoon that "everything in the secondary is quiet."

Financial deals hang on

Recent issues from U.S. Bancorp and Stifel Financial Corp. were hanging on the secondary market, a source said.

U.S. Bancorp's $1.1 billion of 6.5% fixed-to-floating-rate perpetual preferreds were quoted at about $25.25 in trading, a source said. The preferreds priced at par and were quoted Friday at $25.20.

Stifel Financial, along with First Republic Bank, were "hanging in about par," a trader said.

Stifel had priced $175 million of 6.7% $25-par senior notes, and First Republic sold $199.53 million of 6.7% non-cumulative preferreds.

Schwab's hybrid deal

Charles Schwab announced plans for an issue of fixed-to-floating-rate noncumulative perpetual preferred stock, series A, in a 424B5 filing with the Securities and Exchange Commission.

The preferreds (Baa2/BBB+/BB+) will have a fixed-rate dividend until Feb. 1, 2022 and a floating rate based on Libor after that day. The cost per preferred is $1,000.

The deal is being talked at a dividend in the 7% area, a market source said. The deal is expected to price on Tuesday, the source added.

Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC are the bookrunners.

Proceeds will be used for general corporate purposes, including supporting balance sheet growth and potential migration of client cash balances to bank deposits as 2012 progresses.

The investment and financial services company is based in San Francisco.

Aegon's surprise subordinated

Aegon will price 30-year $25-par noncumulative subordinated notes (Baa1/BBB), according to a 424B5 filing with the SEC.

There is talk of a $250 million deal priced in the range of 8% to 8.125%, a trader said. Pricing is expected on Tuesday afternoon.

"I would say they'll price sometime tomorrow afternoon, but it's also possible [books] could stay open until Wednesday," the trader said. "They're probably raising a decent amount of money."

He also added that Aegon's paper was "trading fine in the gray [market] right now."

The bookrunners are Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes.

The life insurance, pension and investment products is based in the Hague, the Netherlands.

Gladstone preps offering

Gladstone Commercial will price 1 million shares of series C cumulative term preferred stock, according to a press release and 424B5 filing with the SEC.

The preferreds will be priced at $25 each. There's a $3.75 million over-allotment option.

The preferreds are non-callable until Jan. 31, 2016, and there is a mandatory redemption on Jan. 31, 2017.

Jefferies & Co., Inc. is the bookrunner.

Proceeds will be used to repay outstanding debt under a credit line and for the acquisition of real estate.

The REIT is based in McLean, Va.

Mixed bag in active trading

Financials continued to dominate the list of most actively traded preferreds, but the name with the highest volume changing hands was government-backed student loan provider SLM Corp., also known as Sallie Mae.

The lender had 2.3 preferreds change hands and ended at $40.75, which was down $2.50 on the day.

"Basically that means somebody had one big trade," a source said.

Coming in behind Sallie Mae in volume was Ally Financial Corp.'s series B trust preferreds, which had 508,000 shares trade. They ended up 14 cents for the day at $21.04.

Up next were Bank of America Corp.'s series H preferreds, which traded 415,000 shares and ended up 18 cents at $24.48.

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