Fifth Third redemption causes sell-off; Alabama Power calls three issues; UMH paper on tap

By Stephanie N. Rotondo

Portland, Ore., May 18 - The preferred stock market was jolted Wednesday with news of what one trader called a "premature call" by Fifth Third Bancorp.

As a result of that news, there was "pressure" on the preferreds, said Allen Hassan, managing director of BTIG's preferred products unit.

The call "kind of took everybody by surprise," Hassan said.

As a result of the news and the ensuing pressure, Fifth Third's preferreds dropped.

On the back of that redemption, Alabama Power Co. announced a call of its own after the bell.

In new issue news, UMH Properties Inc. came out with a small deal during the day. It was expected to price by end of business but had not yet done so at press time.

Shortly before midday, Cincinnati-based Fifth Third announced that it was redeeming early $450 million of trust preferred securities through the end of June.

But a trader said that even ahead of the news, "there was huge sell pressure" on the bank's preferreds, which were trading at a premium.

"This is what investors need to be aware of," he said. "It's a premature call. The original call date was May 15, 2013.

"If you bought it yesterday, you paid $26.68 a 5.37% to the two-year call," he continued. "But now it's a minus 18.3% annualized loss. Now you have to think any bank can do this. Buyer beware!"

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