AG, Ares price $25-par deals; new preferreds weak in trading as supply outweighs demand

By Andrea Heisinger

New York, Sept. 20 - Two new preferred stock deals were in the market on Thursday as the secondary market showed signs of fatigue from all of the supply coming in.

The market was seen "off a touch" or a few pennies as of midday, a trader said, and was off about 6 basis points, or 1 cent to 2 cents per share by the close.

He added that "everybody's been pushing" to get deals priced and that all of the new supply of preferreds has been "choking in the secondary."

"There's too much volume for the dealers' books," he said.

In the U.S. dollar preferred stock market, you'd "almost have to be an idiot to put an offer in at par," the trader said, adding that most investors would be better off waiting until the preferreds cheapen by a quarter.

An active primary saw Ares Capital Corp. sell $175 million of 10-year senior notes at par of $25.

Preferred stock announced Wednesday by AG Mortgage Investment Trust Inc. was priced Thursday morning.

AG, a New York-based real estate investment trust sold $100 million, or 4 million shares, of 8% $25-par series B cumulative redeemable perpetual preferreds, according to an FWP filing with the Securities and Exchange Commission.

The shares were priced in line with talk.

There is an overallotment option of 600,000 shares.

There will be an application to list the new securities on the New York Stock Exchange.

Proceeds will be used to enhance liquidity, to acquire additional credit investments and for general corporate purposes.

Stifel Nicolaus & Co. Inc., RBC Capital Markets LLC, Barclays and Deutsche Bank Securities Inc. are the joint bookrunners.

A trader said early Thursday that the $450 million of new 5.5% subordinated debentures due 2052 from Aflac Inc. were "showing up in a lot of shares" as of late morning in the New York session after being freed for the secondary. They were priced on Wednesday at par of $25.

Trading volume was up for reasons that were a little unclear.

"Volume wise, it was the busiest day in a while," a trader said. "Could be a lag from the Jewish holidays but that was two days ago."

Aflac trades big

The new bonds due 2052 from Aflac were the top-traded shares of the day in the preferred stock market, a source said after the close.

About 1.618 million shares were seen trading as of midday in the New York session, a trader said. By the close, that had jumped to 2.53 million shares, with an official closing price of par, or $25, but a volume-weighted price of $24.78.

"I'm seeing them at par now, but the range has been $24.70 to par," the trader said at midday. The volume weighted average for the Aflac shares then was $24.77 which is "more indicative of where the market really is," the trader said.

By the close the shares had traded "all over the place" and ended up officially closing down, the trader said.

Ares Capital's $25 pars

Ares Capital sold $175 million of 5.875% 10-year senior notes (/BBB/BBB) at par of $25, a market source said.

The deal size was increased from $100 million.

The notes were sold in line with talk in the 5.625% to 6% coupon area.

Ares intends to apply to list the notes on the New York Stock Exchange.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC were bookrunners.

Proceeds are being used for general corporate purposes which includes investing in portfolio companies in accordance with the company's investment objective.

The specialty finance company is based in Los Angeles.

Argo trades up

A $125 million sale of 6.5% $25-par 30-year senior notes priced Tuesday by Argo Group US Inc. was last seen trading at $24.79 as of late morning in the New York session, a trader said.

"It's traded above par," he added.

The notes had been quoted at $24.70 as of midafternoon Wednesday.

Argo has applied to list the notes on the Nasdaq under the symbol "AGIIL."

Argo is a Hamilton, Bermuda-based underwriter of specialty insurance and reinsurance.

Financials see big volume

Coming in behind the Aflac deal in the day's most traded preferred shares were some names from the financial sector, sources said.

A 5.375% perpetual series Q preferred from PNC Financial Services Group Inc. was seen trading in volume of 911,000 shares, ending up 5 cents on the day at $24.80. The preferreds were sold September 14.

Bank of New York Mellon Corp.'s 5.2% series C preferreds were seen with 762,000 shares trading, ending up 1 cent on the day at $24.81.

A 5.5% series O preferred from JPMorgan Chase & Co. had 615,000 shares trade, ending down 6 cents on the day at $24.87.

Coming in at the fifth most volume of the day was a 7.5% series D preferred from Annaly Capital Management Inc. There were 577,000 shares traded, ending up 6 cents on the day to $25.08.

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