Preferreds turn downward; Seaspan's $25-par notes price late; Fannie, Freddie move higher

By Stephanie N. Rotondo

Phoenix, March 27 - Preferred stocks were giving up ground in early Thursday trading, a trend that continued until day's end.

"The market was off a lot today," a market source said.

The Wells Fargo Hybrid and Preferred Securities index was off 29 basis points as of mid-morning, growing to down 32 bps by the bell.

Seaspan Corp.'s proposed offering of $25-par notes due 2019 priced late in the day as a $300 million deal at par to yield 6.375% via bookrunner Sterne Agee & Leach.

Price talk was 6.25% to 6.5%.

Meanwhile, Digital Realty Trust Inc.'s $300 million issue of 7.375% series H cumulative redeemable preferreds were admitted to the New York Stock Exchange on Thursday, as was expected.

The deal came March 19. The ticker symbol is "DLRPH."

A trader quoted the issue at $24.83 bid, $24.85 offered. The preferreds opened at $24.85 but closed at $24.75.

Elsewhere in the secondary, a trader said Fannie Mae and Freddie Mac preferreds were "ticking up a little bit." He noted that Bank of America Corp. had agreed to a settlement with the two agencies late Wednesday in which the bank would pay them $9.5 billion to settle claims related to losses on securities backed by faulty loans.

Additionally, representative Maxine Waters of California introduced a draft proposal of yet another bill aimed at reforming the mortgage giants. As outlined, her bill would create a co-op of lenders that could issue home loans backed by the government. The bill would also create an insurance fund that could be drawn upon in case of another financial crisis.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) gained 11 cents, ending at $11.30. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) gained 2 cents to $10.70, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) rose a nickel to $11.90.

Citigroup suffers

Citigroup Inc.'s preferreds were actively trading on Thursday following Wednesday's news that the Federal Reserve had rejected the bank's proposal to raise dividends and increase stock buybacks.

The 6.875% series K fixed-to-floating rate noncumulative preferreds (NYSE: CPK) fell 4.5 cents to $25.94, and the 6.875% series L noncumulative preferreds (NYSE: CPL) dropped 2 cents to $25.11. About 1.8 million shares of the series Ks were exchanged and another 756,000 shares of the Ls moved.

Citigroup was among a group of about five banks that had their capital plans dashed by the Fed due to a failed "stress test" that indicated management and/or capital provisions were not good enough to deal with another economic downturn.

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