Primary preferred market quiet; Freddie, Fannie active as vote delayed; recent deals gain

By Stephanie N. Rotondo

Phoenix, April 29 - A preferred stock trader said he had not seen or heard of anything in the pipeline on Tuesday.

"I'm not hearing anything yet," he said. "I'm kind of surprised. I thought we would see some more [new issues]."

Though the primary was muted, the secondary was posting gains early in the session.

The Wells Fargo Hybrid and Preferred Securities index was up 9 basis points as of mid-morning. It closed up 14 bps.

Freddie Mac and Fannie Mae paper was moving around a bit as the Senate Banking Committee was slated to meet to discuss a bill proposed by Tim Johnson (D-S.D.) and Mike Crapo (R-Ida.) to wind down the mortgage guarantors. However, the committee delayed a panel vote on the bill for up to two weeks, leaving the market to speculate that an actual vote won't occur this year.

"They have a week to finish mark-up," one trader said. "So it probably won't happen."

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 13 cents, or 1.2%, at $10.93, and Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) gained 5 cents to close at $10.40.

Recent deals in focus

With no real new issues being announced - American Homes 4 Rent has a deal in the works, but traders weren't hearing much about it - preferred investors were focusing on last week's new deals.

Regions Financial Corp.'s $500 million of 6.375% series B fixed-to-floating rate noncumulative perpetual preferreds - a deal that came Thursday - were the most actively traded security of the day, according to a market source.

Over 2 million shares changed hands, he said. The issue ended the day up a dime at $24.70.

The Goldman Sachs Group Inc.'s $700 million of 6.375% series K fixed-to-floating rate noncumulative perpetual preferreds were meantime up 7 cents at $25.22.

About 787,000 shares traded, the source said.

The issue priced April 21.

American Homes deal eyed

As for the American Homes deal, expectations were not all that high for the offering of series C participating preferreds.

"The last one didn't go so well for them," a source pointed out, referring to the company's Dec. 20 sale of $100 million 5% series B participating preferreds (NYSE: AMHPB).

Raymond James & Associates Inc., Jefferies LLC and Citigroup Global Markets Inc. were the bookrunners.

On Tuesday, that paper was trading up a nickel at $24.14. But just last Thursday, the preferreds were trading at $23.92.

As for the deal currently on the table, the company said in an amended S-11 on Tuesday that it had increased the size of the offering to $162.5 million from $100 million.

The company had previously filed an amended statement to reflect the addition of Keefe Bruyette & Woods and Robert W. Baird & Co. as bookrunners. They joined Morgan Stanley & Co. LLC, Raymond James and Jefferies.

Last week, a trader told Prospect News that the new issue would price this week.

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