Duke Energy to Sell Perpetual Preferred

In a new twist for Duke Energy (NYSE:DUK), the giant utility, will sell a new perpetual preferred issue.

In recent time Duke has issued a couple of baby bonds, but they do not have any perpetual preferreds outstanding.

In September, 2018 the company issued a baby bond with a coupon of 5.625% (ticker DUKB) which has traded above $25 recently. The issue which can be seen here.

Previously the company sold a baby bond issue with a coupon of 5.125% back in 1/2013. This issue, which can be seen here, trades in the $24 to $25 range.

The new perpetual preferred stock should be rated investment grade. Moodys has a rating of Baa3 and S&P will likely rate it BBB or BBB-, although they have not yet published their rating.

Ticker symbols have not yet been published.

The preliminary prospectus can be read here.

If this issue prices in the 5.75% to 5.875% range it will likely be a popular preferred stock issue.

34 thoughts on “Duke Energy to Sell Perpetual Preferred”

  1. Fidelity and Schwab are both showing a temp symbol of DUEKL. However FRT is showing activity on both DUEK (the last trades listed are late Monday in the 24.90’s) and DUEKL (most trades so far today at around 25.25)

    1. DUEKL can now be bought on Merrill. Just got some.

      MRBPP is still a no go.

  2. I went to work for Duke in 1985 and worked in several departments for over twenty years. I can say that Duke was operated with skilled management and hired qualified people to work for the company. Duke’s operation is one of the best run utilities in the US. I think you wouldn’t go wrong buying this issue and holding. I plan on buying some of the shares.

  3. I know it is off topic but I am not aware of any other way to post so here goes.
    Is any one else having problems with Schwab reporting qualified dividends/distributions (such as SSW -I) as non-qualified? Talking to Schwab only gets the response that they report what is reported to them from the security. Also DCP -B reported as 1099 income and send a K-1. I would think it should be one or the other. Thanks for any info.

    1. Bob, they seem to be getting it right in my taxable account with Schwab. For example, in March dividends from NI-B, KYN-F and EBBNF were all shown as qualified, with 15% withheld from the Canadian issue EBBNF.

    2. Where do you see DCP as issuing a 1099? It’s certainly issuing K-1’s, as you can find by looking at QOL, mlpdata.com, or at the DCP site. Sounds like maybe a Schwab specific issue.

    3. This is unresearched, for what it’s worth.

      With SSW, they don’t have enough income to declare a dividend, so it’s classified as a “non-dividend” distribution, meaning a return of capital. Should not be taxable but does reduce basis.

      DCP-B will generate a K-1, positive. It’s equity from a MLP. You should find the purchase/sale or distribution from DCP listed on your 1099 but not in a taxable category, i.e. not on the 1099-DIV or -INT.

    1. Tim, for my education, could you explain the reasons that Duke would issue a preferred stock rather than another baby bond. Thanks.

      1. Could be something very complex, related to capital structure requirements specified in loan covenants, indentures, or the like ……. or it could just be the company wanting to maintain a presence in the preferred market, specifically the exchange traded market.

        Probably the latter but to me, as an investor, i don’t care.

        No bad news with this issue.

        1. Historically speaking utilities were big issuers of preferreds. But by the late 1990s it began drying up. This kind of coinsided with the advent of the super holding company swallowing up the various smaller utilities and redeeming the issues. You pretty much covered the possible angles, Bob.
          No one is much concerned about this being cureent income buyers, but issuing fixed perpetual preferreds over the long haul actually is a cheaper form of equity than issuing common stock. In fact some utilities are allowed to add the cost of th preferred stock dividends into their rate requests with their PSC.
          But still few have been issued lately…Ni-B last year, an Alabama Power issue in 2017, an SCE preferred or 2 before that, and IPWLD in 2013 is about all the QDI issuances the past several years.

  4. I called Vanguard. Issue will trade ticker DUEKL. Was told to call back tomorrow to try and place trade.

    1. Pink sheet symbol is DUEK, so Vanguard has set up their own symbol, i expect.

    2. Vanguard is seldom (ever?) the first to list a new issue, but if you call they will do a trade. And they are 2 bucks a trade (for me), even if executed over multiple days. Much better than the thieving boys at TDA at $6.95 charged every day of execution.

      I’m still in my 60-day “free” period at TDA and will have to see what they can do for me after that.

      1. Hi Bob. Just went through a couple of phone calls and emails with TDA for lower commissions. I was at $4.95 with Scottrade and they just continued at the same rate. Took a little push but they did it. Good luck

      1. Issuer: Duke Energy Corporation
        Security: Depositary shares (“Depositary Shares”), each
        representing a 1/1,000th interest in a share of Duke
        Energy Corporation’s 5.75% Series A Cumulative
        Redeemable Perpetual Preferred Stock (“Preferred
        Stock”).
        Liquidation Preference: $25,000 per share of Preferred Stock (equivalent to
        $25.00 per Depositary Share)
        Security Ratings (Moody’s / S&P /
        Fitch):* Baa3 / BBB / BBBSize: $1,000,000,000 (40,000,000 Depositary Shares)
        Term: Perpetual
        Dividend Rate: 5.75%
        Dividend Payment Dates: March 16, June 16, September 16 and December 16,
        commencing on June 16, 2019
        Trade Date: March 25, 2019
        Settlement Date: March 29, 2019 (T+4)
        Optional Redemption: The Issuer may, at its option, redeem the Preferred
        Stock:
        • in whole but not in part, at any time prior to June
        15, 2024, within 120 days after the conclusion of
        any review or appeal process instituted by us
        following the occurrence of a Ratings Event (as
        defined herein), at a redemption price in cash equal
        ACTIVE 241493031
        to $25,500 per share of Preferred Stock (equivalent
        to $25.50 per Depositary Share); or
        • in whole or in part, from time to time, on or after
        June 15, 2024, at a redemption price in cash equal
        to $25,000 per share of Preferred Stock (equivalent
        to $25.00 per Depositary Share),
        plus, in each case, all accumulated and unpaid
        dividends (whether or not declared) to, but excluding,
        such redemption date.

  5. Thanks Grid. Would the pricing have to be known to trade? I cannot find FWP in EDGAR.

    1. Im thinking they are just poking the institutional trading now for pricing action. My TD and Ally are showing the trade and ticker but rejecting orders… Low IQ Vanguard bringing up the rear. Doesnt recognize anything….
      MRBPP has locked up today…Less than a dozen block trades occured Friday, but nothing is trading on it todaythough.

    2. aarod–I hate it when someone knows, but no official pricing is posted but the OTC ticker is known. I certainly have a personal interest but it would be nice to know the pricing.

      1. Tim, I think this gentleman named JerryMac does all pricing for all preferreds. He posts the whisper number on SI and damn near is on the nose every time. He said 5 7/8 to 5.8% area. I didnt get anywhere but I put in blind bids that got rejected. Jerry is usually always on his game somehow.

        1. Tim, Jerry just said a large demand for issue caused it to be upsized to $1 billion dollars. And will be 5.75% now. No link provided, just what he stated.

    3. There is a delay between the submission of a FWP to SEC and its publication on the website. You don’t often see an issue trade before the publication of the FWP but it does happen.

      FINRA dailies are actually a better early warning indicator.

    1. Big Bear, I will prowl around here too for the much needed QDI. On a relative basis the assumed yield is very fair…Duke issued a long since called QDI preferred in 1993 with a 6.375% par yield…When 10 year was 5.72% when issued…. So your getting over 300 basis points over 10 yr compared to ~ 60 basis points on the 1993 issue.

          1. Big Bear, its DUEK. The ticker is loaded but not usable for trading. Now I am not sure whether this is the temporary or permanent ticker though.

              1. Yep, you are correct Aarod. First 4500 share block trade just went on the board under that ticker at $24.97

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