Preferreds weak in midweek trading; National General notes steady; recent deals active

By Stephanie N. Rotondo

Phoenix, Aug. 12 – Rising concerns about global economic growth – particularly in China – were weighing on the preferred stock market in Wednesday trading, though it did recover from its intraday lows.

The Wells Fargo Hybrid and Preferred Securities index ended down 5 basis points. The index was off 14 bps at mid-morning. It had closed the previous session up a similar amount.

On Tuesday, China devalued its currency by 2%, sparking concerns about a currency war. Additionally, investors worried what that might mean for oil prices, as the devaluation could dampen demand.

Trading volume was also “really light,” according to market source, as investors were “trying to figure [the market] out.

“Who wants to sell into weakness?” he said.

As for deals that have been done recently, they made up the bulk of the day’s activity, a source noted.

National General Holdings Corp.’s $100 million of 7.625% $25-par subordinated notes due 2055 had freed to trade by the end of the day, according to one source, though two other sources said they heard the issue was freeing up on Thursday.

A source pegged the notes at $24.55 after the bell. The securities were quoted at $24.50 bid, $24.57 offered at mid-morning.

The notes priced Tuesday via Morgan Stanley & Co. LLC, UBS Securities LLC and Keefe Bruyette & Woods Inc. Sources reported that the company received more orders than expected, though the deal size remained stable.

However, one source was not so sure that story was accurate.

“When they say the deal is oversubscribed, it’s usually smoke and mirrors,” he said. What it really means, he explained, was that the managers have allocated their orders to the syndicate, but that does not mean that the syndicate has sold all of its allotment.

As is typical in the wake of a new deal, NatGen’s other outstanding issues were trading down.

The 7.5% series A noncumulative preferreds (Nasdaq: NGHCP) were a penny weaker at $24.99, while the 7.5% series B noncumulative preferreds (Nasdaq: NGHCO) were off 7 cents at $25.01.

Meanwhile, Global Indemnity plc’s $100 million of 7.75% $25-par notes due 2045 were deemed steady, trading in a $24.80 to $24.87 context, according to a trader.

Another source called the issue a penny higher at $24.83.

That deal priced Aug. 5.

And, IberiaBank Corp.’s $75 million of 6.625% series B fixed-to-floating rate noncumulative perpetual preferreds – a deal from July 29 – were seen offered at $25.17.

Even recent deals that have already listed were busy, compared to the rest of the secondary space.

The Charles Schwab Corp.’s $600 million of 6% series C noncumulative preferreds (NYSE: SCHWPC) – a deal priced July 27 – were seen off 1.5 cents at $25.235. JPMorgan Chase & Co.’s $1.1 billion of 6.15% series BB noncumulative perpetual preferreds (NYSE: JPMPH) were meantime up a penny at $24.97.

The JPMorgan issue priced July 22.

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