Morning Commentary: MetLife to price new $1,000-par preferred issue; secondary aims to trade higher

By Stephanie N. Rotondo

Phoenix, May 27 – The primary preferred stock market had a deal added to the calendar Wednesday, as MetLife Inc. announced an offering of $1,000-par series C fixed-to-floating rate noncumulative preferreds.

A trader said he believed price talk to be in the 5.375% area.

Proceeds from the deal – which is coming via Goldman Sachs & Co., BofA Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC – will be used to repurchase some or all of the company’s outstanding 6.5% series B noncumulative preferreds (NYSE: METPB).

A trader said that ahead of that news, the Bs were trading at a negative yield to call, and as such, “I am sure it’s going to get crushed.”

Sure enough, in early Wednesday trades the issue was off 62 cents, or 2.4%, at $25.15.

The deal also points to an overarching trend currently in that market – that is, the prevalence of the $1,000-par issues.

With such issues being the latest craze in the market, a trader speculated that it was because “it probably saves a lot of money to the underwriter.” Such securities can be put away directly to institutional investors, allowing underwriters to get the deal done more quickly and thus cheaper.

But once that space gets “saturated,” $25-par issuance could pick up, the trader opined.

“We should be seeing some $25-par issues, because I know people are clamoring for it,” he said.

As for the secondary market, things were inching up a bit.

The Wells Fargo Hybrid and Preferred Securities index was up 2 basis points at mid-morning.

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