Digital Realty Trust prices new issue at 5.875%; Fannie, Freddie preferreds gain steam

By Stephanie N. Rotondo

Phoenix, April 2 - New issues began to trickle into the preferred market on Tuesday as Digital Realty Trust Inc. announced an offering of series G cumulative redeemable preferred stock.

"I thought price talk on that was kind of weak," a trader aid, noting that talk was around 5.875%. "It doesn't look like there is a selling group."

The deal came upsized at $225 million and in line with price talk.

As for the upcoming calendar, the trader said that he was hearing rumors of a Bank of America Corp. deal, though he had yet to see any official details.

Among recent deals, DDR Corp.'s $150 million of 6.25% class K cumulative redeemable preferreds were quoted at $24.90 bid, $24.92 offered.

The deal priced March 25.

And, Kayne Anderson MLP Investment Co.'s $110 million of 3.5% series F mandatory redeemable preferred shares were pegged at par.

That issue, which matures in 2020, priced March 26.

In the secondary, Fannie Mae and Freddie Mac remained topical and active as Fannie reported "record earnings," according to a trader. On the back of the numbers, "all the [agency] preferreds are up 40 to 50 cents."

Digital Realty prices

Digital Realty Trust priced $225 million of 5.875% series G cumulative redeemable preferreds on Tuesday.

Ahead of pricing, a trader said the paper had been at $24.60 bid in the early morning gray market, but that it was closer to $24.75 bid at midday.

After the market closed, a market source pegged the issue at $24.70 bid, $24.77 offered.

Dividends will be payable on the last day of March, June, September and December, beginning June 28. The preferreds become redeemable after April 9, 2018 at par plus accrued dividends.

There is also a change-of-control feature.

The San Francisco-based real estate investment trust will contribute proceeds to the operating partnership, which will use the funds to temporarily repay revolving credit facility borrowings, to acquire additional properties, to fund development opportunities and for general corporate purposes, including repurchasing or redeeming debt or preferred securities or a combination thereof.

Fannie, Freddie firm

Fannie and Freddie preferreds posted double-digit gains on Tuesday, as Fannie came out with its latest 10-Q.

Freddie's 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) gained 50 cents, or 14.79%, to $3.88. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) also closed at $3.88, which was up 53 cents, or 15.82%.

And, Fannie's 8.25% series T noncumulative preferreds (OTCBB: FNMAT) increased by 49 cents, or 13.96%, to $4.00.

On Tuesday, Fannie reported its results for the fourth quarter and full year of 2012. The release of the earnings had previously been delayed as the government-backed mortgage provider tried to ascertain whether a return to profitability would trigger an accounting change related to its deferred tax assets.

For the year, Fannie reported a record profit of $17.2 billion. Of that amount, $7.6 billion was made in the fourth quarter.

The agency said it paid a $4.2 billion dividend to the U.S. Treasury in the first quarter and that it is contemplating paying taxpayers as much as $58.9 billion later this year.

Since being taken into conservatorship in 2008, Fannie has received over $116 billion in taxpayer funds. Since then, the company has paid back over $35.5 billion.

© 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.