Deals from Public Storage, B. Riley Financial price, come upsized; Capitala lists on NYSE

By Stephanie N. Rotondo

Seattle, May 23 – The preferred stock new issue pipeline was starting to flow on Tuesday, as two deals were added to the calendar and later priced.

Public Storage brought a $250 million offering of 5.15% series F cumulative preferred stock.

The deal came upsized from $100 million and tight to the 5.25% price talk.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC ran the books.

Ahead of pricing, a market source said the deal was “wrapped around $24.90” in the gray market.

Earlier in the day, a trader said the paper was quoted at $24.85 bid, $24.90 offered.

As for the company’s existing preferreds, the 4.9% series E cumulative preferred shares (NYSE: PSAPrE) were off 12 cents at $23.78.

The preferreds become redeemable on June 2, 2022 at par plus accrued dividends.

The new securities will be listed on the New York Stock Exchange under the ticker symbol “PSAPrF.”

Proceeds will be used to make investments in self-storage facilities and in entities that own self-storage facilities, for the development of self-storage facilities and for general corporate purposes.

Meanwhile, B. Riley Financial Inc. priced a $52.5 million sale of 7.5% $25-par senior notes due 2027.

A source noted that the size more than doubled from previous expectations of $25 million.

Price talk was 7.5%.

FBR Capital Markets, B. Riley, Wunderlich Securities Inc. and Incapital LLC were the bookrunners.

“It should move up nicely,” a trader said prior to the deal’s pricing, pegging the notes at $24.80 in the early gray market. He noted that the company already had a 7.5% issue, though it comes due in 2021.

That paper (Nasdaq: RILYL) was up 26 cents, or 1.01%, at $26.01 in mid-morning trading. However, it finished the day down a dime at $25.65.

The company can redeem the issue on or after May 31, 2020 at par plus accrued interest.

The new securities will be listed on the Nasdaq Global Select Market.

The Woodland Hills, Calif.-based financial services company will use proceeds to fund its recently announced merger with Wunderlich Investment Co. Any remaining funds will be used for general corporate purposes.

Capitala lists

As for recently priced deals, Capitala Finance Corp.’s $70 million of 6% $25-par notes due 2022 listed on the Nasdaq Global Select Market on Tuesday, a market source reported.

The ticker symbol is “CPTAL.”

The deal priced May 10. The size was lifted from $50 million.

The notes closed Tuesday’s session at $25.25.

Ladenburg Thalmann & Co. Inc., BB&T Capital Markets, Janney Montgomery Scott LLC, William Blair & Co. LLC and Wunderlich Securities Inc. were the joint bookrunners.

There is a $10.5 million over-allotment option.

Interest is payable on the last day of February, May, August and November, beginning Aug. 31. The notes become redeemable on or after May 31, 2019 at par plus accrued interest.

The Charlotte, N.C.-based business development company will use the proceeds to redeem a portion of its $113.4 million outstanding 7.125% fixed-rate notes due 2021.

Fannie, Freddie weighed down

Fannie Mae and Freddie Mac preferreds were down “5% to 7% so far today,” a market source said near the day’s close.

While the paper didn’t end that far down, the preferreds did see losses closer to 4% to 6% for the session.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined 29 cents, or 4.76%, to $5.80. The 8.25% series T noncumulative preferreds (OTCBB: FNMAT) were down 26 cents, or 4.37%, at $5.69.

As for Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ), they were off 35 cents, or 5.88%, at $5.60.

The source attributed the day’s declines to a report issued by FTN strategist Jim Vogel. In the note, Vogel said that Mel Watt, head of the Federal Housing Finance Agency, still has not explained “what it might accomplish to accumulate capital each quarter” when any corporate tax cut would probably create a “one-time GAAP earnings hit as soon as the new rate was passed.”

Even if the GSEs manage to avoid reporting sizable quarterly losses, “infinitesimal capital ratios relative to $3.3 trillion and $2 trillion balance sheets hardly inspire investor confidence versus the size of the remaining Treasury backstop available.”

Both agencies are slated to have their capital coffers reduced to zero in early 2018.

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