Kimco’s deal frees to trade; KCAP on tap; Annaly active; Fannie slips, then recovers

By Stephanie N. Rotondo

Seattle, Aug. 8 – Preferred stock investors continued to focus on new and recent deals in Tuesday trading.

For instance, Kimco Realty Corp.’s $225 million of 5.125% class L cumulative redeemable preferreds – a deal that priced on Monday – were seen at closing at $24.55, off 3 cents from the previous day.

The paper was at $24.67 at mid-morning.

About 2.92 million of the preferreds changed hands during the session, making the issue the day’s top trader.

The issue freed to trade early in the day, trading under the temporary ticker “KIMRP.”

The new preferreds came tight to the 5.125% to 5.25% price talk. The size of the deal was increased from $150 million.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC ran the books.

Annaly Capital Management Inc.’s 6.95% series F fixed-to-floating rate cumulative redeemable preferreds (NYSE: NLYPrF) – a deal from July 25 – meantime remained actively traded. But the preferreds were losing a little bit of the ground earned on Monday, slipping 4 cents to $24.99.

Monday’s move above par marked the first time the issue had breached that threshold.

Looking ahead, KCAP Financial Inc. added a deal to the calendar early in the session, a $50 million offering of $25-par notes due 2022.

Keefe Bruyette & Woods Inc., Janney Montgomery Scott LLC and Ladenburg Thalmann & Co. Inc. are running the deal.

The company plans to use proceeds for general corporate purposes.

Away from new and recent deals, Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were initially weaker but ended the day a touch higher.

The preferreds closed at $7.05, up 3 cents. The issue was off 8 cents, or 1.14%, at $6.94 at mid-morning.

Fannie’s variable rate series P noncumulative preferreds (OTCBB: FNMAH) were also busy but unchanged at $5.50.

On Monday, the agency’s stress test results were released, showing that the company – as well as its sector peer Freddie Mac – had failed.

As it stands right now, Fannie and Freddie have a combined capital buffer of $600 million – a figure that, under the current conservatorship terms, will be reduced to zero in 2018. Though both agencies have been profitable in the last couple of years, the so-called “net worth sweep” requires that a bulk of the GSEs’ profits be put back to the Treasury by way of a dividend payment.

In the wake of the tests, however, those who have been pushing for the GSEs’ ability to build up more capital – mostly investors, although there are a few political allies as well – may use the data to back up their arguments.

Back in May, the FHFA head, Mel Watt, even noted to Congress that the current capital plan is not sustainable and indicated he may be open to building up a larger capital cushion.

But so far, housing finance reform has stalled and either side – those fighting for Fannie and Freddie to recapitalize and those looking to unwind both firms – have been moved to compromise only so far.

© 2015 Prospect News.
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