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Midday Commentary: Preferreds firm post-holiday; Goldman planning sale of $25-par, $1,000-par paper
By Stephanie N. Rotondo
Phoenix, April 21 - The preferred stock market was on the rise after the long-three day holiday weekend.
The Wells Fargo Hybrid and Preferred Securities index was up 36 basis points as of mid-morning on Monday.
As was expected, the new issue pipeline was beginning to flow, as the Goldman Sachs Group Inc. announced plans for not one, but two new deals.
The New York-based investment bank said it was selling $25-par series K fixed-to-floating rate noncumulative perpetual preferred stock, as well as $1,000-par series L fixed-to-floating rate noncumulative perpetual preferred stock.
The $25-par paper will be listed; the $1,000-par will not.
A trader said price talk on the $25-par securities was around 6.5%, while talk on the $1,000-pars was around 6%.
"It seems to be doing well and being placed mainly by the lead manager," he said, seeing the series Ks trade in a $24.87 to $24.90 context in the gray market. He noted that the issue had ticked up as high as $24.95.
"There should be enough demand to soak these things up without any real fluctuations in the secondary market," he said.
Goldman Sachs & Co., BofA Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. Inc., RBC Capital Markets, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunning managers for the $25-par deal. Goldman is running the books by itself on the $1,000-par offering.
Proceeds will be used to provide additional liquidity and for general corporate purposes.
Now that the seal has been broken on the new issue deal flow, the trader said he was expecting more to come throughout the week.
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