Wells Fargo sells new fixed-to-floating issue; Morgan Stanley active; Public Storage dips

By Stephanie N. Rotondo

Phoenix, Dec. 11 - Wells Fargo & Co. entered the preferred stock primary market on Wednesday.

The San Francisco-based bank said it was selling series R class A fixed-to-floating rate noncumulative perpetual preferreds, which were talked around 6.625%.

"I imagine they'll change that," a trader said of the price talk. "We're still waiting to see if they are going to have a large selling group. There is large demand for it."

The trader saw the new issue at $24.90 bid, $24.95 offered in the early gray market.

The deal came shortly after the market closed, with $750 million of the preferreds pricing at par to yield 6.625%.

The issue will begin floating on March 15, 2024 at Libor plus 369 basis points.

After the close, a market source pegged the issue at $24.89 bid, $24.94 offered. Another trader quoted the shares at $24.95 bid, par offered.

Among Wells' other preferred securities, the 5.85% series Q fixed-to-floating rate noncumulative preferreds (NYSE: WFCPQ) were quite active on the heels of the new deal, as over 1.7 million preferreds were exchanged.

A source speculated that at least some of that trading was due to investors swapping out of the issue and into the new one.

The preferreds finished the day down 54 cents at $23.27. A source noted that the volume weighted average price was $23.40.

Meanwhile, Morgan Stanley & Co. Inc.'s $850 million of 6.875% series F fixed-to-floating rate noncumulative preferreds continued to dominate overall trading.

Early in the session, the preferreds were trading around $24.95. By the end of business, the paper had increased 4.5 cents, according to a source, closing at $24.995.

In other recent deals, Fifth Third Bancorp's $450 million of 6.625% series I fixed-to-floating rate noncumulative preferreds were offered at par early in the day, according to a trader.

But the preferreds lost ground as the day wore on, ending at $24.75, which a source said was down 17 cents.

Both Morgan Stanley and Fifth Third came last week.

"I thought we'd see a little kick what with the government saying they have a debt deal so they can avoid a shutdown in January," a trader said of the preferred space's overall performance as of mid-morning. That wasn't really happening, he lamented.

"A lot of stuff went ex-dividend," he added.

The Wells Fargo Hybrid and Preferred Securities index was trading off 13 bps shortly before lunchtime. At the end of the day, the index was down 43 bps.

Public Storage sinks

A market source said he was surprised at how far down Public Storage's 5.9% series S cumulative preferreds (NYSE: PSAPS) declined in midweek trading.

"There's a couple people looking to buy it," he said.

The shares fell 49 cents, or 2.23%, to $21.46.

There was no fresh news out on the Glendale, Calif.-based real estate investment trust.

The company focuses on storage solutions.

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