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Preferreds muted after holiday; DTE brings $25-par debentures; Fannie, Freddie mixed
By Stephanie N. Rotondo
Seattle, Nov. 28 – The preferred stock market was starting the post-holiday week on the subdued side, according to one trader.
“Everybody’s just coming in and getting their bearings” after the long Thanksgiving weekend, the trader said.
The market was also kicking off with a weaker tone, as the Wells Fargo Hybrid and Preferred Securities index softened by 28 basis points.
The index was down 17 bps at mid-morning.
Despite the weaker tone, the new issue market was showing signs of life.
DTE Energy Co. brought $280 million of 6% $25-par 2016 series F junior subordinated debentures due Dec. 1, 2076 via BofA Merrill Lynch, J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities LLC.
Price talk was 6% to 6.125%, according to a market source.
Post-pricing, a market source placed the issue at $24.75.
The debentures become redeemable on or after Dec. 15, 2021 at par plus accrued interest. The notes can be redeemed prior to that date, in whole, in the event of a tax change or rating agency event.
Upon a tax event, the redemption price is par plus accrued interest. In the case of a rating agency event, the price is 102% of par plus accrued interest.
The Detroit-based power producer will use proceeds to redeem $280 million of the outstanding 2011 series I 6.5% junior subordinated debentures due 2061 (NYSE: DTZ). In the wake of that news, the 6.5% notes were off a dime at $25.06.
In secondary trading, investors continued to focus on Fannie Mae and Freddie Mac.
The GSE preferreds have been active – and mostly better – since the U.S. election and have typically been moving in the same direction. However, in Monday’s session, the names diverged a bit.
Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) ended 3 cents better at $6.08. Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined 12 cents, or 1.88%, to $6.27.
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