Safe Bulkers sells new issue; Regions lists on NYSE, Goldman to list; Fannie, Freddie fall

By Stephanie N. Rotondo

Phoenix, April 30 - The preferred stock market was gaining strength ahead of a Federal Reserve announcement on Wednesday.

The central bank released a statement from its monthly meeting around 2 p.m. ET. As expected the Fed again trimmed its bond-buying program to $45 billion from $55 billion, citing an economy that continues to improve.

The cut in the repurchase program was the fourth $10 billion decrease the Fed has made.

The Wells Fargo Hybrid and Preferred Securities index was up 11 basis points as of mid-morning. The index continued to run up, ending the session up 32 bps.

In the primary, Safe Bulkers Inc. announced a new deal early in the session. The Athens, Greece, drybulk shipping company said it was selling at least $50 million of series C cumulative redeemable perpetual preferred stock in a non-rated deal.

Price talk was around 8.125%, according to the trader.

There was a $24.60 bid for paper in the gray market, he said.

Shortly after the close, the company said it had priced $50 million of the preferreds at par to yield 8%.

Morgan Stanley & Co. LLC and UBS Securities LLC are the joint bookrunning managers.

Recent deals doing well

Among recent deals, Regions Financial Corp.'s $500 million of 6.375% series B fixed-to-floating rate noncumulative perpetual preferred stock was admitted to the New York Stock Exchange on Wednesday.

The deal priced via Goldman Sachs & Co., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Morgan Stanley on April 24. The ticker symbol is "RFPB."

The shares were improving over Tuesday's session upon listing, hitting $24.80 by mid-morning. The issue had previously closed at $24.70.

By the close, the issue had firmed even more, finishing at $24.86, which compared to opening levels around $24.75.

Meanwhile, the Goldman Sachs Group Inc.'s $700 million of 6.375% series K fixed-to-floating rate noncumulative perpetual preferreds were also on the rise early in the day, trading at $25.40, a trader said.

However, after the bell, another market source said the paper closed at $25.28, with a volume weighted average price of $25.30.

The Goldman issue - which priced April 21 - is slated to hit the NYSE on Thursday. The ticker symbol is "GSPK."

As for Morgan Stanley's $500 million of 6.625% series G noncumulative perpetual preferred stock, the securities were initially quoted at $24.95 bid, $25.05 offered. Post-close, a source pegged the paper at par, with a VWAP of $24.98.

Morgan Stanley priced the issue April 22.

Fannie, Freddie fail test

A stress test designed to see how well Fannie Mae and Freddie Mac would fare in another economic downturn showed that the agencies would need about $190 billion of taxpayer funding to stay afloat in a worst-case scenario.

On the news, the mortgage backers saw their preferreds giving up ground.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) slipped 7 cents to $10.86, while Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) lost a dime to $10.30.

The test was designed to be similar to that given to banks and other financial institutions. However, a trader noted that the results were skewed, given that the government currently takes a majority of the agencies' earnings per quarter, leaving them very little to build up any kind of liquidity cushion.

In a more moderate scenario, in which modest growth is assumed, the companies would turn a combined profit of $48 billion in 2014 and 2015.

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