Preferred stock primary pipeline to see at least one new issue next week; NGL units list

By Stephanie N. Rotondo

Seattle, June 16 – The preferred stock primary market continued to be silent on Friday, though one trader said at least one new deal was on the horizon.

“I’m hearing there will be a deal early next week,” a trader said, adding that it was expected to be a utility deal, “so it won’t be big.”

With the Federal Reserve opting to raise interest rates earlier in the week, the question became will the primary start to pick up or not?

“I think we should see more deals with the housing starts missing estimates,” a trader commented. “It lowers the risk of [another] rate hike.”

The latest Commerce Department report showed that housing starts fell 5.5% for the month, hitting the lowest level since September 2016.

Following its two-day policy meeting, the Fed said on Wednesday that it was increasing interest rates to 1% to 1.25%, up from 0.75% to 1% previously. Furthermore, the central bank indicated that at least one more increase could occur before the end of the year.

The Wells Fargo Hybrid and Preferred Securities index managed to edge up slightly, gaining 6 basis points. The index was flat at mid-morning.

The U.S. iShares Preferred Stock ETF was meantime up 3 bps, after being off 5 bps earlier in the day.

NGL Energy Partners LP’s $185 million of 9% series B fixed-to-floating rate cumulative redeemable perpetual preferred units were admitted to the New York Stock Exchange early Friday.

The trading symbol is “NGLPrB.”

Upon listing, the units dropped to $24.76. While that was better than the $24.70 level at the open, it was down from $24.90 as of Thursday’s close. However, the paper clawed its way back up by the bell, ending at $24.85.

The deal priced June 6, coming upsized from $50 million and in line with the 9% price talk.

As for the week’s new deals, Validus Holdings Ltd.’s $250 million of 5.8% series B noncumulative preference shares remained under pressure on Friday, falling 15 cents to par.

The issue – which came on Monday and freed to trade on Tuesday – was an instant success post-pricing, driving well above the par mark. But the paper started to retreat on Thursday.

The issue has a temporary trading symbol, “VRRHP.”

Recent issues, however, were not the main focus of the day.

NuStar Energy LP’s 7.625% series B fixed-to-floating rate cumulative redeemable preferred units (NYSE: NSPrB) were rather busy, trading over 1.02 million times. The units slid a nickel to $25.33, though there was no fresh news to cause either the surge in activity or the decline in value.

Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were also active. Like NuStar, the preferreds were exchanged over 1.02 million times during the session. Unlike NuStar, the paper added value, rising 34 cents, or 5.83%, to $6.17.

Freddie’s usual partner in crime, Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS), were not as busy as the Freddie issue, trading only about 294,000 times. Still, the GSE preferreds were better, adding 35 cents, or 5.74%, to close at $6.45.

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