Dominion Resources brings upsized sale of $25-par notes; Bluerock prices, frees to trade

By Stephanie N. Rotondo

Seattle, July 12 – The preferred stock market pared its Tuesday gains by the bell, ultimately ending with a modestly weaker tone.

The Wells Fargo Hybrid and Preferred Securities index was down 2 basis points for the day. The index had been up 8 bps at mid-morning.

In the primary space, the new issue calendar continued to build up.

Dominion Resources Inc. announced plans to sell at least $250 million of 2016 series A $25-par junior enhanced subordinated notes due 2076. The deal later came upsized – $800 million notes were sold – and tighter than initial talk at 5.25%.

Price talk was 5.375% to 5.5%. The deal came via BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC.

Ahead of pricing, a trader said the new notes were in a $24.95 bid, par offered context in the early gray market. Post-pricing, a market source placed the issue at par.

Meanwhile, Bluerock Residential Growth REIT Inc. officially priced its offering of series C cumulative redeemable preferreds, a deal first announced on Monday. The company sold $50 million of the preferreds at par to yield 7.625%.

Price talk was initially in the 7.75% area before it was revised to 7.625%.

A trader said he had not seen any markets for the paper, though he said there was a $25 bid in the Street, no offers.

The trader also said that the issue would free to trade later in the day. Another source backed up that speculation, saying he thought the paper had freed up by the end of the day.

The source pegged the preferreds at $25.05 offered.

Janney Montgomery Scott LLC, D.A. Davidson & Co. and FBR Capital Markets ran the books.

And, Stifel Financial Corp.’s $150 million of 6.25% series A noncumulative perpetual preferreds – a deal priced Monday – were seen closing at $25.72.

A trader had pegged the preferreds at $25.35 bid, $25.50 offered at mid-morning.

The deal had freed to trade by the end of business.

Keefe Bruyette & Woods Inc., BofA Merrill Lynch and Morgan Stanley were the joint bookrunners.

Fannie, Freddie move up

Fannie Mae and Freddie Mac preferreds were actively trading higher on Tuesday.

Fannie’s 8.25% series S noncumulative preferreds (OTCBB: FNMAS) were up 2 cents at $4.55, while Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) improved 7 cents, or 1.56%, to $4.55.

The gains came amid continued speculation on GSE reform and how that might get done. In recent months, many groups – including 32 congressional Democrats – have tried to persuade the Federal Housing Finance Agency to allow the mortgage giants to rebuild their capital base. In response, other groups have urged the FHFA not to take such action and to instead leave any reform measures to Congress.

Last week, senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.) wrote a letter to FHFA head Mel Watt, saying that “incremental steps” to be taken by the agency – the supposed overseer of the GSEs – would be considered fine, but that allowing the GSEs to build their liquidity back up did fall under that umbrella.

The letter again called for the FHFA to wait for Congress to deal with the issue of housing reform. However, any hope that such reform would come soon was somewhat dashed by the last paragraph of the letter: “In closing, we are hopeful that housing finance reform will be on the agenda for the next Congress and Administration and look forward to working with you on that effort,” the senators wrote. “Until that time, we strongly encourage you to focus your efforts on steps that would help, not hurt, housing finance reform legislation.”

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