GE Capital brings new $100-par issue; BB&T upsizes deal; recent issues recoup previous losses

By Stephanie N. Rotondo

Phoenix, July 24 - The preferred stock market continued to see a sell-off Tuesday. "People are still nervous about Europe," a trader said.

"Everything is down a little bit," he added, pointing specifically to European issuers such as Royal Bank of Scotland Group plc, ING Groep NV and Aegon NV.

"Those Royal Banks are down 30 to 40 cents again," he said.

"It was a red day overall," another market source said. "But we bounced up a little right at the end."

The primary market, however, was holding up better than it did on Monday.

General Electric Capital Corp. announced plans to issue series B fixed-to-floating-rate noncumulative perpetual preferred shares.

The $100-par issue was originally being talked around 6.5%, a trader said. However, that was revised to 6.25%. The $1.75 billion deal came after the close at 6.25%.

BB&T Corp. also said it was planning a new issue. Like GE Capital, the bank brought its deal after the market had closed. It priced $1 billion of 5.625% series E noncumulative perpetual preferred stock.

Over in the secondary, Fifth Third Bancorp and DDR Corp. issues were among the day's most actively traded securities. Both issues were recently called, leaving one source to opine that the volume was based on "recycling" of paper.

GE launches new issue

GE Capital announced and then priced a $1.75 billion issue of 6.5% series B fixed-to-floating-rate noncumulative perpetual preferreds on Tuesday.

The deal came in line with revised talk, and a market source noted that the $100-par paper had already freed to trade.

"It's institutional, so they do that," he said.

At midday, and ahead of pricing, a trader had said the deal was "doing very well," quoting the issue at 100.5 bid, 102 offered in the gray market.

After the bell, a source pegged the issue at 100.625 bid, 100.875 offered.

"It's a good deal," the source said, basing his opinion on a combination of credit quality and the difference in processes between $100-par and $25-par issues.

In the $100-par market, he said, issues price and trade more like corporate debt - that is, without the immediate discounts that some $25-par issues face.

The rate on the new issue will be fixed until Dec. 15, 2022, at which time it will reset to Libor plus 470.4 basis points.

The securities will not be listed on any exchange.

Barclays Capital Inc., Bank of America Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC. and UBS Securities LLC are the joint bookrunning managers.

Proceeds will be used for general corporate purposes.

GE Capital is a Norwalk, Conn.-based financial services firm.

BB&T prices upsized deal

BB&T meantime brought a $1 billion sale of 5.625% series E noncumulative perpetual preferred stock at the low end of talk and upsized from $250 million.

A trader saw the paper trading at $24.90 in the gray market at midday.

At the close, a source saw the preferreds trading at $24.90.

BB&T will apply to list the new series of preferreds on the New York Stock Exchange under the ticker symbol "BBTPE."

The joint bookrunners are Bank of America Merrill Lynch, BB&T Capital Markets, Deutsche Bank Securities Inc., Morgan Stanley, UBS and Wells Fargo Securities LLC. The co-managers are Raymond James & Associates Inc., RBC Capital Markets LLC and Stifel, Nicolaus & Co. Inc.

Proceeds will be used for general corporate purposes, which may include the acquisition of other companies, repurchasing common shares, paying down or refinancing maturing debt and extending credit to or funding investments in subsidiaries.

New issues clawing back up

Among recent issues, Stanley Black & Decker Inc.'s 5.75% $25-par junior subordinated notes due 2052 recouped their Monday losses, trading around $25.55, according to a trader. That deal has been faring better than most, mostly because preferred issuance from a company that is not a financial or a real estate investment trust is so rare.

Also, Invesco Mortgage Capital Inc.'s 7.75% series A cumulative redeemable perpetual preferred stock traded up to $24.72.

Even CommonWealth REIT's new 5.75% $25-par senior notes due Aug. 1, 2042 were heading into higher territory, trading at $24.40. That compared to closing levels of $24.10 on Monday, a trader said.

'Recycling' of called issues

Fifth Third Bancorp's 7.25% trust preferreds (NYSE: FTBPB) were seen topping the day's most actively traded list.

The issue ended flat at $25.41. The preferreds were called on July 9 for Aug. 8 redemption, and the call price is $25.422917.

DDR's 7.5% class I cumulative redeemable preferreds, another called issue, were also active and up a touch.

The preferreds (NYSE: DDRPI) closed up a penny at $25.15. The paper will be taken out Aug. 20 at $25.1875.

A market source speculated that the activity in both names was simply a matter of "recycling."

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