Liquidity limited; First Republic Bank, CIT preferreds free to trade; B. Riley notes list

By Stephanie N. Rotondo

Seattle, June 1 – The preferred stock market began the new month a little hesitant, due in part to desks being empty.

In addition to it being a shortened holiday week for Memorial Day, Wednesday marked the beginning of the Jewish holiday Shavuot. Given the holidays, some market players opted to take the whole week off, market sources reported.

The new issue space – which had been trying to push out paper earlier in the week – also took a break.

“There’s probably nothing new for the rest of the week,” a trader said, adding that he wasn’t hearing any talk of deals for the coming week either.

“But it appears to be a good time to bring everything because it all pops out and trades at a premium,” he said.

As for the week’s deals, First Republic Bank’s $200 million of 5.125% series H noncumulative preferreds – a deal priced Wednesday – were seen ending at $25.04.

The paper was pegged at $24.95 bid, par offered in early dealings.

A trader noted that the issue had freed from the syndicate.

CIT Group Inc.’s $325 million of 5.8% $1,000-par series A fixed-to-floating rate noncumulative preferreds also freed to trade after pricing Wednesday.

The paper was “trading really strong,” according to one trader, who saw the preferreds in a 102 to 102.125 context.

Another source placed the paper at 102 bid.

From Tuesday’s business, DDR Corp.’s $175 million of 6.375% class A cumulative redeemable preferred shares finished the session at $25.02.

Earlier in the day, a trader said the preferreds were holding at $24.98 bid, par offered.

“Trading has kind of dried up in that one; nobody’s paying attention to that one right now,” he remarked.

Meanwhile, B. Riley Financial Inc.’s $60,375,000 of 7.5% $25-par senior notes due 2027 were admitted to the Nasdaq Global Select Market on Thursday under the ticker symbol “RILYZ.”

The notes ended at $25.21, which compared to $24.90 at the open.

The company initially sold $52.5 million of the notes on May 23. On Wednesday, it was reported that the $7,875,000 greenshoe had been fully exercised, bringing the total amount outstanding to $60,375,000.

FBR Capital Markets, B. Riley, Wunderlich Securities Inc. and Incapital LLC were the joint bookrunners.

GSEs firm on recap proposal

A market source said Fannie Mae and Freddie Mac preferreds were gaining steam on news that a group of investors led by Paulson & Co. and Blackstone Group LP were backing a proposal to recapitalize and release the GSEs from government control.

“Some of the preferreds are up 4% to 5% on this fantasy,” he said.

While the preferreds did fare well during the day, they were not overly active, given the plethora of empty desks.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) improved 40 cents, or 6.25%, to $6.80. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) rose 26 cents, or 4.19%, to $6.46.

The proposal was reportedly developed by Moelis & Co., acting as a financial adviser to the investor group. It would allow the mortgage guarantors to rebuild their coffers to between $155 billion and $180 billion, while also having the government’s stake in the agencies reduced.

Taxpayers could get as much as $100 billion under the plan.

However, it’s not considered very likely that the plan will get much support from the government.

“Recap and release is a complete restoration of the status quo as it existed before the financial crisis,” a source explained.

Additionally, Mel Watt, head of Federal Housing Finance Agency, and Steven Mnuchin, Treasury Secretary, have both indicated that they would not even consider such a plan.

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