New deal pipeline stalls; Entergy New Orleans notes free, trade above par; secondary firms

By Stephanie N. Rotondo

Seattle, March 16 – The preferred stock primary market took a breather midweek, with no new deals announced.

One trader said he had heard there could be a deal coming Wednesday but had not seen anything as of mid-morning.

“They will probably give it a couple of days for people to absorb [the recent supply],” he said.

Newly priced deals continued to generate a fair bit of investor interest.

From Tuesday’s dealings, Entergy New Orleans Inc.’s $110 million of 5.5% $25-par first mortgage bonds due 2066 freed up early in the day.

At the close, a market source saw the issue popping 23 cents to $25.92.

Earlier in the day, a trader said the notes “jumped quite a bit,” trading as high as $25.35.

Huntington Bancshares Inc.’s $350 million of 6.25% series D noncumulative perpetual preferreds were meantime pegged at $24.90 bid, $24.97 offered at mid-morning and seen closing just north of that at $24.98.

The preferreds dominated overall trading for the day, with about 2.2 million shares exchanged.

That issue came Monday and freed to trade late Tuesday morning.

From last week’s business, KKR & Co. LP’s $300 million of 6.75% series A noncumulative perpetual preferred units were seen in a $24.95 to par range.

The units priced Thursday.

Also from last week, a market source said that AmTrust Financial Services Inc.’s $125 million of 7.75% series E noncumulative preferreds – a deal from March 8 – were expected to list on the New York Stock Exchange on Thursday.

However, he also noted that he hadn’t seen much trading in the paper.

The ticker symbol will be “AFSIPE.”

Fed boosts secondary

The secondary market finished the day markedly higher after the Federal Reserve announced that it was holding interest rates in a 0.25% to 0.5% range for the time being.

The Wells Fargo Hybrid and Preferred Securities index was up 30 basis points at the bell. At mid-morning, the index was up 4 bps.

A source said there was “no question” that the majority of the day’s gains came after the Fed announcement.

As well as keeping rates steady, the Fed also lowered its forecast for how many increases there could be this year. Its decision was based on the global economic headwinds currently afflicting the market, though the central bank also noted positive economic indications domestically.

In secondary trading, Citigroup Inc.’s 7.875% fixed-to-floating rate trust preferred securities (NYSE: CPN) were actively traded, though a source said there was not a clear reason why – not even the potential of the issue being called in the near term.

“I think people are realizing that is not in the cards,” he said.

The preferreds ended at $25.97, up 34 cents. About 2 million shares changed hands.

Deutsche Bank AG’s 7.6% trust preferred securities (NYSE: DTK) were also on the busier side but moved off a nickel to $24.75.

A source said that weakness was due to comments made by John Cryan, chief executive officer, at a conference in London Wednesday morning.

“He was basically saying ‘we are going to lose money again,’” the source said. “Even though that’s not the first time he’s said it, maybe this time somebody was actually listening.”

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