Preferreds remain firm; Atlas Pipeline units drift lower; Fannie, Freddie push higher

By Stephanie N. Rotondo

Phoenix, Jan. 28 – There was more strength seen in the preferred stock market Wednesday despite growing concerns about a strengthening dollar.

The Wells Fargo Hybrid and Preferred Securities index ended up 21 basis points, spiking in the last hours of trading. The index was up 9 bps at mid-morning.

“People are worried now with the dollar gaining strength that it will effect larger cap companies with foreign growth,” a trader said. However, he said it was possible that low oil prices could combat that.

Meanwhile, the positive tone of the market was certainly benefitting recently priced deals.

Bank of America Corp.’s $1 billion of 6.5% series Y noncumulative preferreds hit the New York Stock Exchange on Wednesday, as was expected.

“It’s moving up nicely,” a trader said early in the day, seeing the paper in a $25.05 to $25.06 context.

The issue closed at $25.17, up from opening levels of $25.04.

Over 2.88 million shares were exchanged, making the preferreds again the most actively traded issue among paying securities.

The deal priced Jan. 20. The ticker symbol is “BACPY.”

CorEnergy Infrastructure Trust Inc.’s $50 million of 7.375% series A cumulative redeemable preferreds were meantime seen at par, down 3 cents on the day.

The deal came Jan. 22.

“I’m not sure when it’s listing,” a trader said.

And, CHS Inc.’s $450 million of 7.5% class B series 4 cumulative redeemable preferreds (Nasdaq: CHSCL) hit $26.00 by mid-morning and kept climbing to eventually close at $26.10 – a gain of 25 cents.

The issue came upsized from $250 million on Jan. 13 and quickly moved up to levels north of par.

Atlas weakens on call

Atlas Pipeline Partners LP’s 8.25% class E cumulative redeemable perpetual preferred units (NYSE: APLPE) were weakening, just one day after the company said it was redeeming all 5.06 million outstanding units.

The units ended at $25.25, down 27 cents, or 1.06%.

Though the preferred units are technically not callable until 2019, the company is merging with a wholly owned subsidiary of Targa Resources Partners LP and is thus triggering its change of control feature.

The redemption – at par plus accrued dividends – will take place Feb. 28, the same day the merger is expected to close.

Fannie, Freddie rise

Fannie Mae and Freddie Mac preferreds were busy and better Wednesday as a U.S. Court of Federal Claims judge said investors could proceed with a lawsuit against the government.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose 32 cents, or 8.65%, to $4.02. The 8.25% series T noncumulative preferreds (OTCBB: FNMAT) increased by 45 cents, or 8.26%, to $5.90.

In Freddie paper, the fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) put on 26 cents, or 7.01%, closing at $3.97.

The government had requested a stay in proceedings in regards to a lawsuit brought by investors – including Fairholme Funds – that alleges the government’s takeover of most of the agencies’ profits was unconstitutional. The investor group is now allowed to continue to collect information, which it hopes to use to prove that the Court of Federal Claims is the appropriate court to hear the case.

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