Preferreds ticking up; Targa offers preferred units; UMH a no-show; Southern Co. improves

By Stephanie N. Rotondo

Phoenix, Oct. 7 – The preferred stock market continued to firm up in Wednesday trading.

The Wells Fargo Hybrid and Preferred Securities index pushed up 16 basis points by the bell.

A trader said that the buzz continues to be that the Federal Reserve will not raise interest rates this year. However, he noted that San Francisco Fed president John Williams “came out and said that that’s not the case, that they should be fine with liftoff this year.”

Either way, the trader opined that any rate increases were already priced into the market, so any impact should be minimal.

As the market has rebounded this week, the new issue pipeline has picked up momentum.

Targa Resources Partners LP announced a deal on Wednesday, a $75 million offering of series A cumulative redeemable perpetual preferred units.

Price talk is 9% to 9.125%, according to a market source.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunners.

A trader saw an early gray market of less 45 cents to less 15 cents.

“It’s a small deal,” he said of the issue and its wide market. “I think they will get it put away. I think people are a little nervous about the high coupon and the name.”

Still, he added that there is “always somebody” willing to take the risk.

A market source said the issue was expected to price at 4:30 p.m. ET, but details were not available at press time.

There was meantime no word on UMH Properties Inc.’s planned sale of $50 million series B cumulative redeemable preferreds, a deal which was announced on Monday.

Price talk emerged on Tuesday, coming at 7.375% to 7.5%.

CSCA Capital LLC is running the books.

As for recently priced deals, the Southern Co.’s $1 billion of 6.25% $25-par series 2015A junior subordinated notes due 2075 – a deal that came Thursday – moved up again, being quoted at $25.03 bid, $25.07 offered early in the day. By the close, a source said the issue finished at $25.47.

He saw the volume weighted average price at $25.07.

TravelCenters of America LLC’s $100 million of 8% $25-par senior notes due 2030 were also improving, with a trader pegging the notes at $24.80 bid, $24.85 offered.

That issue came Sept. 30.

Fannie, Freddie busy

Fannie Mae and Freddie Mac preferreds continued to be actively traded on Wednesday.

“There was decent trading in GSEs,” a market source said, noting that there was no fresh news out, just a continuation of news that was reported on Tuesday.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) moved up 7 cents, or 1.38%, to $5.15. However, Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were steady at $5.12.

On Tuesday, senators Bob Corker and Mark Warner spoke at a Bipartisan Policy Center event on housing reform. Both are sponsors of a bill that would hasten housing reform and move Fannie and Freddie out from under government conservatorship.

But that bill has been stalled – several times – and Corker and Warner have been pleading their case as to why Congress needs to act faster. In addition to the Tuesday event, Corker was on CNBC on Wednesday.

A downer for Deutsche

Late in the day, it was reported that Deutsche Bank will take $8 billion in charges on its third-quarter results.

Though there wasn’t much activity in the bank’s preferreds on Wednesday, a market source opined that volume in the name could surge come Thursday.

The charges are related to Deutsche’s stake in Hua Xia Bank, a litigation provision and goodwill impairment.

The quarterly report is scheduled to be released on Oct. 29.

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