Sunstone Hotel to price new cumulative preferreds; BB&T frees to trade; GSE paper firms

By Stephanie N. Rotondo

Seattle, March 3 – The preferred stock new issue pipeline was showing no signs of letting up on Thursday as Sunstone Hotel Investors Inc. announced an offering of series E cumulative redeemable perpetual preferreds.

A market source said price talk was around 7%, with Wells Fargo Securities LLC and BofA Merrill Lynch running the books.

Another market source said the deal was slated to price on Friday.

The Aliso Viejo, Calif.-based real estate investment trust plans to use the proceeds in part to redeem some or all of its outstanding 8% series D cumulative redeemable preferreds (NYSE: SHOPD). That issue was inching higher, rising 6 cents to $25.40.

From midweek business, BB&T Corp.’s $425 million of 5.625% series H noncumulative perpetual preferreds had not yet freed as of mid-morning, according to a trader, but did free later in the day.

The issue was also assigned a temporary trading symbol, “BBTTP.”

The preferreds ended the day at $24.80, down from opening levels of $24.82.

A market source quoted the paper at $24.75 bid, $24.85 offered.

A trader saw the issue at $24.80 bid, $24.82 offered early in the session.

The deal was upsized from $150 million, and pricing was tightened from the initial 5.75% to 5.875% range.

Meanwhile, Southern California Edison Co.’s SCE Trust V’s $300 million of 5.45% fixed-to-floating rate trust preference securities – a deal priced Tuesday and freed Wednesday – were pegged at $25.33 bid.

And, Charles Schwab Corp.’s $750 million of 5.95% series D noncumulative perpetual preferreds – a deal priced Monday and freed on Tuesday – were quoted at $25.33 bid, $25.45 offered.

Among deals from the previous week, W.R. Berkley Corp.’s 5.9% $25-par subordinated notes due 2056 – a $110 million deal, including a $10 million greenshoe, that priced Feb. 23 – were admitted to the New York Stock Exchange on Thursday.

The ticker symbol is “WRBPC.”

Paper was trading at $24.84 at the close, up from opening levels of $24.80.

Fannie, Freddie up on ruling

Fannie Mae and Freddie Mac’s preferreds were inching higher on Thursday as investors weighed Wednesday’s ruling from the Ninth Circuit Court of Appeals.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose 6 cents, or 1.91% to $3.20, while Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) improved 8 cents, or 2.52%, to $3.25.

On Wednesday, the Ninth Circuit Court upheld a previous district court ruling that deemed the GSEs as private companies. The ruling could have huge implications, as it calls the government’s net worth sweep provision into question.

“Our prior decision in Rust v. Johnson, 597 F.2d 174 (1979), where we held that Fannie Mae was a federal instrumentality for state/city tax purposes, does not change the result, because Rust does not address Fannie Mae or Freddie Mac’s status under the False Claims Act,” the court said in its decision.

“As we have previously held, just because an entity is considered a federal instrumentality for one purpose does not mean that the same entity is a federal instrumentality for another purpose...Nor does the Federal Housing Finance Agency’s conservatorship transform Fannie Mae and Freddie Mac into federal instrumentalities.”

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