Asset Manager State Street Corporation Sells a New Preferred Offering
By: Tim McPartland,
State Street Corporation (NYSE:STT), a large asset manager, has sold a new large issue of preferred stock. As with all the investment grade preferred issues sold recently the coupon is fairly meager at just 5.35%, although this is a “fixed-to-floating rate issue and after 3/15/2026 the coupon will begin to “float”.
This new issue is investment grade having a Moody’s rating of Baa1 and a Standard and Poor’s rating of BBB. We have the ratings hierarchy for Moody’s and Standard and Poor’s on our website here.
Being a banking issue this new issue is required to be non-cumulative (in order for banks and insurance companies to count preferred stock as tier 1 capital they must be non-cumulative). While most preferred stock issues have a 5 year optional redemption period the fixed-to-floating rate issues have a 10 year period prior to when the company can redeem the shares (at the companys option).
We have noted recently that even new issues with low coupons have traded firmly as income investors have clamored to lock in solid yields. We would expect this would continue to be the case with this issue, although it would seem that with the low initial coupon that the upside to the share price would be very minimal.
This issue will be trading on Thursday on the OTC Grey Market under the temporary ticker SSTTP. Our OTC Grey Market primer can be found here.