Preferred Stock Midday Commentary: J.P. Morgan makes $9 billion redemption; no pricing for NextEra

By Stephanie N. Rotondo

Phoenix, June 12 - The news of the day in the preferred stock market Tuesday was word of a $9 billion call of capital securities by J.P. Morgan Chase & Co., according to a trader.

The call follows similar redemptions announced by Citigroup Inc. and SunTrust Bank Inc. Sources have previously stated that such events should pick up, now that the Federal Reserve's proposed capital treatment rules have been published.

"I think we'll see those continually running in," a trader said of the calls. "That should be relatively positive for domestic banks."

Two of the called issues - the 8% fixed-to-floating series Z capital securities (NYSE: JPMPZ) and the 7.2% series BB fixed-to-floating capital securities - were softening a bit, but were trading at a premium to the call.

The Zs were down 15 cents at midday Tuesday, trading at $25.28, while the BBs were 9 cents weaker at $25.53.

The call date is July 12.

However, the redemptions beg the question: Where will all that money go?

"These amounts of products are not going to be replaced with the same type or quality of stuff," the trader said, adding that the new issue market likely cannot keep up either. "It will be interesting to see where the money goes."

He opined that cash could begin flowing into the hybrid market, like General Electric Capital Corp.'s new $2.25 billion issue of 7.125% series A fixed-to-floating rate noncumulative perpetual preferred stock.

That $100,000-par issue was trading at "104 and change," the trader said.

Money could also be put to work in more REITs, he speculated, though even then supply might not be able to meet demand.

Meanwhile, the preferred market was waiting for NextEra Energy Capital Holdings Inc.'s $25-par series H junior subordinated debentures due June 15, 2072 to price.

"That should be today," a trader said.

Price talk is around 5.625%. The paper was trading at $24.65 in the midday gray market.

Also in the primary arena, Charles Schwab Corp.'s recent 6% series B noncumulative perpetual preferred stock officially listed on the New York Stock Exchange Tuesday.

The ticker symbol is "SCHWPB." The preferreds were trading down a nickel to $24.98 at midday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.