Southern Co. taps market with $800 million sale of $25-par notes; Fannie, Freddie weaken

By Stephanie N. Rotondo

Seattle, Sept. 12 – New preferred stock issues continued to enter the marketplace on Monday, continuing the trend from the previous week.

The Southern Co. kicked off the week with a planned offering of $250 million of $25-par 60-year series 2016A junior subordinated notes. The deal priced shortly before the close, coming upsized at $800 million. The notes were priced at par to yield 5.25%, the tight end of the 5.25% to 5.275% price talk.

A trader quoted that issue at $24.80 bid, $24.85 offered in the early gray market. After the bell, another market source placed the issue “around $24.80.”

BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC ran the books.

The notes become callable Oct. 1, 2021 at par plus accrued interest. The issue can be redeemed prior to that date upon a tax event at par plus accrued interest. Additionally, upon a rating agency event, the notes can be called at 102 plus accrued interest.

Fannie Mae and Freddie Mac preferreds were under pressure on Monday following news out on Friday of another court case being thrown out.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) dropped 42 cents, or 10.99%, to $3.40. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) declined 43 cents, or 11.98%, to $3.16.

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