Preferred stocks gain strength; Tsakos gets temporary ticker; Southern California active

By Stephanie N. Rotondo

Seattle, March 30 – Preferred stocks remained firm as the end of the month neared.

The Wells Fargo Hybrid and Preferred Securities index added 19 basis points on Thursday. The U.S. iShares Preferred Stock ETF was up 16 bps.

The preferred space was following along with the broader markets, which got a bump on the latest GDP report. The report showed that GDP increased by 2.1% in the fourth quarter of 2016, better than the 2% growth expected by economists.

In the week’s new issues, Tsakos Energy Navigation Ltd.’s new $100 million of 9.25% series E fixed-to-floating rate cumulative redeemable preferreds were seen at closing at $24.90, which compared to $24.85 at the open.

The issue was quoted at $24.78 bid, $24.85 offered in early dealings.

A market source reported that the deal – priced late Wednesday and upsized from $50 million – was already assigned a temporary ticker, “TNPEP.”

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, UBS Securities LLC, Citigroup Global Markets Inc. and Stifel Nicolaus & Co. Inc. were the bookrunners.

Scorpio Tankers Inc.’s $50 million of 8.25% $25-par senior notes due 2019 – a deal priced on Tuesday – were meantime seen at $25.003.

Stifel Nicolaus and Janney Montgomery Scott LLC led that deal.

Both issues were free to trade, according to a market source.

Among listed issues, Southern California Edison’s 5.45% fixed-to-floating rate cumulative trust preference securities (NYSE: SCEPrK) were quite active, trading up 7 cents to $27.10.

However, there was no fresh news to cause the movement. One source opined the volume – over 1.55 million shares – might be due to quarter-end positioning.

Fannie, Freddie fall

Fannie Mae and Freddie Mac’s preferreds retreated from their midweek highs, as senators Corker and Warner urged the Federal Housing Finance Agency to not allow the GSEs to recapitalize.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) dipped 16 cents, or 2.3%, to $6.79. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) slipped 2 cents to $6.42.

The GSE-linked preferred had gained ground in the previous session, as investors mulled news that senators Corker and Warner were once again looking to solve the problem of the GSEs, meeting with industry groups and former government officials to discuss options. Mike Crapo, head of the Senate Banking Committee, has also reportedly started to get briefings on the matter in hopes of reaching a compromise.

But the senators sent a letter to the FHFA on Wednesday that said allowing the mortgage giants to add to their capital buffer would be harmful to their plans to reform the housing-finance system.

“Ouch,” one source quipped. “Talk about kicking someone when they are already down.”

Shareholders have been pushing for the agencies to be allowed to add to their coffers, in hopes of getting a return on their holdings. But with the “net worth sweep,” both Fannie and Freddie are required to turn over a bulk of their profits to the government.

Though shareholders are attempting to overturn the net worth sweep, they have thus far been unable to do so.

Additionally, concerns about the new administration’s tax plan have some worried that Fannie and Freddie will lose value on assets used to write down their taxes. If that happens, and the GSEs wind up posting a loss, they could be forced to draw more funds from taxpayers.

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