CBS notes active ahead of call date; HSBC's rising costs disappoint; Gladstone plans deal

By Stephanie N. Rotondo

Portland, Ore., Feb. 27 - Preferred stocks were 'flat or mixed" in Monday trading, a market source reported.

"Initially, we opened down, then it rebounded a little," he said. "We probably closed within pennies [of Friday's levels]."

CBS Corp.'s $25-par senior notes were the day's most actively traded securities. On Friday, the mass media company said it will redeem the issue at par plus accrued interest.

HSBC Holdings plc's preferreds were also trading busily following the bank's earnings release. The numbers were "in line" with expectations, a market source said, but increased expenses were not viewed favorably.

In the primary realm, Gladstone Investment Corp. announced plans for a new issue of series A cumulative term preferred shares. However, the small, Jeffries & Co.-led deal was not garnering much attention in trading.

Also, Triangle Capital Corp.'s $50 million offering of $25-par fixed-rate senior notes due March 15, 2019 - a deal announced Thursday - did not price during the session.

"I heard something about it last week and then it just died," a trader said of the deal.

CBS notes trade actively

New York-based CBS saw its 6.75% $25-par senior notes due 2056 trading actively on Monday. The notes (NYSE: CPV) were unchanged at $25.39.

On Friday, CBS said it will redeem the $700 million issue with proceeds from a new issue. That new issue priced Friday as a $700 million offering of 3.375% 10-year senior notes.

The notes were sold at 99.095 to yield 3.483%, or Treasuries plus 150 basis points.

HSBC reports, gyrates

HSBC Holdings reported a higher yearly profit for 2011, but increasing costs put pressure on the London-based bank's preferred stock.

However, the preferreds managed a late-day surge, allowing them to end slightly higher than on Friday.

"It wasn't that earnings were so horrible," a market source said. "From what I gathered, [the preferred stock] was responding to a greater growth in expenses than there was in revenues. Other than that, everything was in line."

The preferreds (NYSE: HCSPB) rose 2 cents to $26.82.

For the year, net profit was $16.18 billion, up from $3.2 billion the year before. The figures were helped out by a $4.2 billion accounting gain.

Costs viewed as a percentage of income, however, rose to 57.5% from 55.2%, well over the bank's target range of 48% to 52%.

Net operating income meantime was boosted to $60.2 billion, buoyed in part by a 12% increase in Asian revenues.

Gladstone plans offering

McLean, Va.-based business development company Gladstone Investment said in a regulatory filing Monday that it plans to sell at least $25 million of series A cumulative term preferred shares.

A trader said price talk was 7% to 7.25%. He saw a $24.60 bid for the paper shortly before the close.

The trader noted that it was a small deal, led by Jeffries, and as such, "it's going to be put away pretty quickly."

The deal did not price Monday.

The company will be required to redeem the $25-par preferreds in 2017 at par plus accrued dividends, but it has the option to begin a redemption in 2016. Additionally, Gladstone will redeem the preferreds in the event of a change of control.

And in the event that the company does not maintain an asset coverage ratio of at least 200%, Gladstone will redeem a portion of the preferreds in an amount equal to the lesser of the minimum number of preferreds needed to meet that ratio or the maximum number of preferreds that can legally be redeemed with cash on hand.

The company has applied to list the preferreds on the Nasdaq under the symbol "GAINP."

Proceeds will be used to repay borrowings under the company's credit facility. Any remaining funds will be used for investments and general corporate purposes.

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