Morgan Stanley prices benchmark fixed-to-floating deal; Medley expected to list soon

By Stephanie N. Rotondo

Seattle, Jan. 24 – The preferred stock primary market popped out a new deal on Tuesday, as Morgan Stanley & Co. Inc. brought $1 billion of 5.85% series K fixed-to-floating rate noncumulative preferreds.

Price talk was initially in the 6.125% area, according to a market source, but was soon revised to 5.875%.

Post-pricing, a market source saw the issue at $25.15 bid, $25.20 offered.

Prior to the pricing revision, a trader said the issue was “already trading at a premium” in the early gray market, pegging the paper at $25.05 bid.

“I imagine they will revise that price talk back quite a bit,” the trader said.

The issue is non-callable for 10 years. Morgan Stanley & Co. LLC is the bookrunner.

The dividend rate will be fixed until April 15, 2027, at which point it will be based on Libor plus 349.1 basis points.

Proceeds will be used for general corporate purposes.

On the heels of the new deal, the New York-based financial services firm’s 6.375% series I fixed-to-floating rate noncumulative preferreds (NYSE: MSPrI) were initially off a penny at $26.25 but closed 6 cents higher.

Meanwhile, a trader said that Medley LLC’s $34.5 million of 7.25% $25-par notes due 2024 “should be trading on the New York Stock Exchange soon.”

He said the ticker symbol would be “MDLQ.”

The company priced the deal on Jan. 13, initially selling $30 million of the notes. On Jan. 18, the company said its $4.5 million greenshoe had been fully exercised.

The deal was upsized from $25 million and the greenshoe up from $3.75 million.

As for the secondary market, it continued to be all GSEs, all the time.

However, Fannie Mae and Freddie Mac preferreds were mixed on the day.

Fannie’s variable rate series O noncumulative preferreds (OTCBB: FNMFN) were the most active of the GSE-linked issues, rising a dime to $13.95. The 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were meantime off 14 cents, or 1.64%, at $8.40.

In Freddie paper, the 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) dipped a penny to $7.99.

Overall, the preferred market was somewhat mixed for the session.

The Wells Fargo Hybrid and Preferred Securities index ended the day down 1 bp, though it was up 21 bps at mid-morning.

“It wasn’t a big sell at the end of the day,” a source said. “Consider that 30-year Treasuries were down 1 point while 10-year Treasuries were down 17 ticks.

“The reality seems to be we outperformed Treasuries today.”

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