Aspen Insurance’s new deal keeps pipeline flowing; recent deals drop; Fannie, Freddie dive

By Stephanie N. Rotondo

Seattle, Sept. 13 – Yet another preferred stock issue hit the tape on Tuesday, as Aspen Insurance Holdings Ltd. brought $225 million of 5.625% noncumulative perpetual preference shares.

The deal came upsized from $150 million and tight to the 5.625% to 5.75% price talk.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, Wells Fargo Securities LLC, Citigroup Global Markets Inc. and Barclays ran the books.

The Hamilton, Bermuda-based reinsurance company said it plans to use the proceeds to redeem its 7.401% fixed-to-adjustable rate noncumulative preference shares (NYSE: AHLPA) and its 7.25% noncumulative perpetual preference shares (NYSE: AHLPB).

The 7.401% securities traded off 62 cents, or 2.37%, to $25.40. The 7.25% issue dipped 12 cents to $25.84.

The 7.401% preference shares become redeemable Jan. 1. The 7.25% securities are callable on July 1.

Meanwhile, recently priced preferred issues were drifting downward on Tuesday as the broader markets also came in.

The Southern Co.’s $800 million of 5.25% $25-par junior subordinated notes due 2076 – a deal from Monday that came upsized from $250 million and on the tight end of talk – were quoted at $24.80 bid, $24.89 offered.

From last week’s business, Customers Bancorp Inc.’s $75 million of 6% series F fixed-to-floating rate noncumulative preferreds were pegged at $24.92.

That issue also came upsized and tight to talk.

Entergy Mississippi Inc.’s $260 million of 4.9% $25-par first mortgage bonds due 2066 were meantime seen at $24.70 bid in early trading. The deal came Thursday.

From Wednesday, Associated Banc-Corp’s $100 million of 5.375% series D noncumulative preferreds remained under pressure, slipping to $25.17 offered, according to a trader.

More pain for Fannie, Freddie

Fannie Mae and Freddie Mac preferreds continued to lose ground on Tuesday. The securities have been weaker in recent days but have been punished by Friday’s news that a U.S. District Court judge dismissed a shareholder lawsuit brought in regards to the government’s net worth sweep.

The preferreds were down 3% to 6% at mid-morning – and it only got worse from there.

Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) dropped 13 cents, or 4.11%, to close at $3.03, while the 6.55% noncumulative preferreds (OTCBB: FMCKI) declined 33 cents, or 12.69%, to $2.27.

In Fannie paper, the 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) fell 25 cents, or 7.35%, to $3.15, as the variable rate series O noncumulative preferreds (OTCBB: FNMFN) lost 60 cents, or 10.71%, to end at $5.00.

Each of those issues traded over 1 million times during Tuesday’s session.

One trader remarked that there was a story circulating that a highly anticipated ruling from the Court of Appeals was expected by mid-October. So far, the various shareholder lawsuits brought against the government in relation to its net worth sweep have gone mostly in favor of the government – including a dismissal of one such case on Friday, in which U.S. District Court judge Katherine Caldwell ruled that the Federal Housing Finance Agency, as conservator, does not have any fiduciary duty to shareholders.

Dayton’s second chance

Dayton Power & Light Co. announced Tuesday its plan to redeem all of its outstanding 3.75% series A cumulative preferreds, its 3.75% series B cumulative preferreds and its $3.9% series C cumulative preferreds on Oct. 13.

Each issue is $100-par.

A trader said the redemption was “interesting,” as the Dayton, Ohio-based power producer had announced a similar plan about 15 years ago. The company then pulled the redemption and kept the issues outstanding.

“A lot of people lost money,” he said, as the issues were trading in the $70 range but quickly jumped to par.

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