Preferreds firm in midweek trading; Medley deal delayed; GSEs active but finish mixed

By Stephanie N. Rotondo

Seattle, Jan. 11 – The preferred stock market ended with a positive tone on Wednesday.

The Wells Fargo Hybrid and Preferred Securities index rose 62 basis points. The iShares U.S. Preferred Stock index was 49 bps higher.

“About half the gains would be tied to the gains in [Treasury] bonds,” a market source said. “Probably the rest is tied to strength in the common equity market and credit spreads.”

A trader said Medley LLC’s planned sale of $25-par notes due 2024 was expected to price on Wednesday but that the new issue was postponed to at least Thursday.

“Someone said they rushed a document through the [Securities and Exchange Commission] and there was some sort of waiting period,” the trader said. The trader also noted that once the market learned of the deal, its 6.875% $25-par notes due 2026 (NYSE: MDLX) got hammered.

Because of the weakness in the secondary piece, the trader said there was talk the company might have to make the terms of the planned deal more attractive.

On Monday, ahead of any word of the new issue, the notes ended at $24.25. At Tuesday’s close – and once the offering had become news – the paper was at $23.55.

But Wednesday trading saw the paper edging back up 54 cents, or 2.29%, to $24.09.

In a regulatory filing late Monday, Medley registered $28.75 million of the notes, aiming for a $25 million sale of the issue with a $3.75 million greenshoe.

As previously reported, one trader speculated that the deal could grow to as much as $50 million.

FBR Capital Markets, Incapital, BB&T Capital Markets, Compass Point, Ladenburg Thalmann & Co. Inc., William Blair and JonesTrading are the joint bookrunners.

Proceeds will be used to repay a portion of outstanding amounts under a senior secured term loan facility with Credit Suisse AG, Cayman Islands Branch.

Secondary ends strong

Elsewhere in the secondary, GSE-linked preferreds continued to dominate.

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were steady at $8.10, while Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) fell a nickel to $7.63.

AXIS Capital Holdings Ltd.’s 5.5% series E noncumulative preferreds (NYSE: AXSPrE) were also among the day’s busiest securities, trading up 18 cents to $22.56.

Another active name was KeyCorp, as its 6.125% series E fixed-to-floating rate noncumulative preferreds (NYSE: KEYPrI) improved 7 cents to $26.69.

And, Capital One Financial Corp.’s 6% series H noncumulative preferreds (NYSE: COFPrH) ended up 11 cents at $25.12.

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