Preferred market gyrates, ends about flat; Invesco Mortgage prices upsized offering

By Stephanie N. Rotondo

Phoenix, Sept. 5 – After being down all week, the preferred stock market was attempting to recover some losses in Friday trading.

“The market was kind of bouncing around in a bunch of different directions today,” one market source said. At the open, the Wells Fargo Hybrid and Preferred Securities index was up 6 basis points to 8 bps, he said, then it fell to down 10 bps. By lunchtime, the index had moved back up into positive territory, gaining 4 bps to 5 bps.

But in the last hour of trading, the index “faded,” the source said, finishing up just 1 bp.

Invesco Mortgage Capital Inc. released an FWP filing on Friday in regards to its offering of series B fixed-to-floating rate cumulative redeemable preferreds. The company sold $150 million of the shares – upsized from $75 million – at par to yield 7.75%.

The deal priced late Thursday, according to the filing. Pricing came in line with talk.

In early trading, a trader quoted the new issue at $24.60 bid, $24.65 offered.

The deal had not yet freed, the trader said, though he expected it would by the afternoon.

Dividends will be payable on the 27th day of March, June, September and December, beginning Dec. 27. The rate will be fixed through Dec. 27, 2024, at which time it will begin to float at Libor plus 518 bps.

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

Among other recent deals, Bank of America Corp.’s $1 billion of 6.625% series W noncumulative preferreds were seen at $24.85 at day’s end, down from $24.90 the day before.

Early in the session, the preferreds were placed in a $24.86 to $24.88 context.

The deal came Tuesday and freed to trade on Wednesday. The company also sold $2 billion of 6.25% $1,000-par series X fixed-to-floating rate noncumulative perpetual preferreds.

Looking to the coming week, a trader said the pipeline could fill up.

“We’re hearing of a couple deals for next week,” he said, though he did not have specific names.

HSBC, Santander busy

In the secondary market, trading volumes have been on the lighter side during the shortened post-holiday week. However, HSBC Holdings plc and Banco Santander SA have been more active than not of late.

According to a market source, HSBC’s preferreds have been busy as the company has been on a roadshow for a new contingent convertible bond issue. With the new deal upcoming, “people are selling out [of the preferreds] thinking they are going to be called soon,” the source said.

As for Banco Santander, its 10.5% series 10 noncumulative guaranteed preferred securities (NYSE: SANPE) have been active as the bank called the issue on Aug. 30 for Sept. 29.

In Friday trading, the Santander issue closed up a penny at $25.65.

In the HSBC issues, the 8% exchangeable perpetual subordinated capital securities (NYSE: HSEB) gained 3 cents to $26.69, while the 8.125% exchangeable perpetual subordinated capital securities (NYSE: HSEA) fell 4 cents to $25.98.

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