Dairy Farmers sells $150 million perpetual preferreds; Southern Co., Aspen improve

By Stephanie N. Rotondo

Seattle, Sept. 15 – A new preferred stock issue hit the market early Thursday, coming as a bit of a surprise.

On Wednesday, a trader had reported that the pipeline was closed for the week, though more deals were expected to emerge next week.

Dairy Farmers of America Inc. said it planned to sell $100 million of series C cumulative perpetual preferreds, with price talk at 7.5%. The deal priced at 7.125%, with $150 million of the $100-par preferreds being sold.

A market source pegged the paper at around 100.5.

BofA Merrill Lynch and J.P. Morgan Securities LLC led the Rule 144A deal.

As for deals from earlier in the week, both the Southern Co.’s $800 million of 5.25% $25-par junior subordinated notes due 2076 and Aspen Insurance Holdings Ltd.’s $225 million of 5.625% noncumulative perpetual preference shares were seen at $24.90 bid at mid-morning.

Sothern came Monday and Aspen followed on Tuesday. Both issues have freed to trade.

Meanwhile, Entergy Mississippi Inc.’s $260 million of 4.9% $25-par first mortgage bonds due 2066 – a deal from Sept. 8 – are slated to appear on the New York Stock Exchange on Friday, according to a market source.

The ticker symbol will be “EMP.”

A trader pegged the issue at $24.75 in early trading.

The established market was trading off as the day started, though a trader noted that “a lot of things are going ex-dividend, so things are bouncing around.”

The Wells Fargo Hybrid and Preferred Securities index was down 5 basis points at the bell. It was down 10 bps earlier in the session.

Fannie, Freddie rally

The recent massive declines in Fannie Mae and Freddie Mac preferreds brought investors back to the table on Thursday, which helped the GSE-linked issues regain some ground.

A market source commented that the day’s gains – and highly active trading – were likely due to investors taking advantage of the depressed prices.

“There’s no real substantive news” to cause the improvement, he said.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) traded nearly 4 million times on Thursday, moving up 17 cents, or 5.52%, to $3.25. The variable rate series O noncumulative preferreds (OTCBB: FNMFN) meantime gained 24 cents, or 4.95%, to close at $5.09.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds were also better, rising 18 cents, or 5.94%, to $3.21. Those securities were exchange nearly 3 million times.

The mortgage giants’ preferreds started to really take a beating on Friday, when it was learned that U.S. District Court judge Karen Caldwell had dismissed yet another shareholder lawsuit. That lawsuit alleged that the Federal Housing Finance Agency, as conservator, had failed to rehabilitate the companies and that by allowing the net worth sweep, it was effectively nationalizing the entities.

But Caldwell claimed that the Homeownership and Economic Recovery Act of 2008 gave the FHFA “extraordinary” powers, which “exceeds the normal bounds of a conservatorship.” Shareholder groups shave decried the ruling as essentially giving a government body the ability to “plunder” a private company.

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