Tsakos prices upsized fixed-to-floating preferreds; Wells Fargo eyed on settlement news

By Stephanie N. Rotondo

Seattle, March 29 – The preferred stock market attempted to extend its Tuesday gains into the midweek session, according to index readings. However, like the broader markets, the preferred space ended lower than it started.

The Wells Fargo Hybrid and Preferred Securities index closed the day flat, though it was up 8 basis points at mid-morning. The U.S. iShares Preferred Stock ETF finished 8 bps better, after being up 18 bps earlier in the day.

The primary continued to sputter out deals, as Tsakos Energy Navigation Ltd. brought $100 million of 9.25% series E fixed-to-floating rate cumulative redeemable preferreds.

The deal came upsized from $50 million. Price talk was around 9.25%, according to a market source.

A trader pegged the deal at $24.60 bid, $24.80 offered in the early gray market.

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, UBS Securities LLC, Citigroup Global Markets Inc. and Stifel Nicolaus & Co. Inc. are running the books.

Dividends will be fixed until May 28, 2027, at which point the rate will begin floating at Libor plus 688.1 bps.

The preferreds become redeemable on that date, at par plus accrued dividends.

The Athens, Greece-based seaborne oil transporter’s new issue came on the heels of a similar deal from Scorpio Tankers Inc., which priced late Tuesday.

New York-based Scorpio sold $50 million of 8.25% $25-par senior notes due 2019, coming in line with price talk.

Stifel Nicolaus and Janney Montgomery Scott LLC led that deal.

The notes were seen in a $24.63 to $24.75 context in early dealings.

In the wake of the new issues, Tsakos’ 8.75% series D cumulative redeemable preferreds (NYSE: TNPPrD) were trading off 19 cents to $24.90.

However, Scorpio’s 7.5% $25-par notes coming due in October (NYSE: SBNB) were slightly better after declining in the previous session.

The notes were up 5 cents at $25.12.

Scorpio plans to use the new proceeds to fund a tender offer for the 7.5% baby bonds. The tender expires April 11, and participating holders will receive par plus accrued interest.

Wells Fargo inks settlement

Wells Fargo & Co.’s 5.5% series X class A noncumulative preferreds (NYSE: WFCPrX) managed to end slightly higher on the day, though the issue gyrated between red and green for most of the session.

The preferreds closed a penny higher at $24.48. The paper dominated the trading volume, with about 1.54 million of the preferreds being traded.

The movement in the issue came as the San Francisco-based bank announced it had reached a $110 million settlement with customers that were impacted by a fake account scandal revealed in September. As the story goes, Wells Fargo employees were opening fake accounts without the approval of the customer.

The employees reportedly engaged in the fraudulent acts in order to meet sales targets set by corporate.

Those targets have since been dismantled.

The settlement is in addition to any refunds the bank has already paid to the affected customers.

GSE paper climbs back up

Fannie Mae and Freddie Mac preferreds rebounded from their Tuesday lows on Wednesday.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose 12 cents, or 1.76%, to $6.95, while Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) added 4 cents to close at $6.44.

As previously reported, the GSEs’ preferred stock was pressured on Tuesday in the wake of a court ruling that did not go in favor of shareholders.

However, one market source noted that it was word of a new housing reform push that was “potentially more important.”

It was reported Tuesday that senators Corker and Warner were once again looking to solve the problem of the GSEs, meeting with industry groups and former government officials to discuss options. Mike Crapo, head of the Senate Banking Committee, has also reportedly started to get briefings on the matter in hopes of reaching a compromise.

Corker and Warner have already attempted to drive the matter forward, but their previous proposal failed in 2014. Those against that legislation said the bill would have resulted in higher mortgage rates and fewer home-buying opportunities for low-income borrowers.

Shareholders also opposed the bill, as it would have wound down the agencies and replaced it with a new system, thereby leaving them with little chance of any recovery.

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