Preferreds hold their ground; DTE’s $25-par debentures free to trade; NuStar units to list

By Stephanie N. Rotondo

Seattle, Nov. 29 – Preferred stocks were moderately weak in early Tuesday trading but eventually finished unchanged for the day.

The Wells Fargo Hybrid and Preferred Securities index closed flat, though it was down 13 basis points at mid-morning.

DTE Energy Co.’s new $280 million of 6% $25-par 2016 series F junior subordinated debentures due 2076 – a deal priced Monday – “went out at $25.75,” a market source said at the close.

The source also noted that the paper freed to trade.

The debentures were seen in a $24.75 to $24.80 context in early trading.

The deal came at the tight end of the 6% to 6.125% price talk via BofA Merrill Lynch, J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities LLC. 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).

Those debentures traded up 2 cents at $25.08.

The redemption date is Dec. 28.

Meanwhile, a market source said NuStar Energy LP’s $200 million of 8.5% series A fixed-to-floating rate cumulative redeemable perpetual preferred units will begin trading on the New York Stock Exchange on Wednesday.

The ticker symbol will be “NSPA.” The units are trading under a temporary ticker, “NTSRF.”

At the bell, the units were pegged at $25.10, which was off a dime from the previous session, and down 20 cents from $25.30 as of Tuesday’s open.

A trader pegged the units at $25.10 bid, $25.18 offered in early dealings.

The deal came Nov. 17, upsized from $150 million and priced in line with the 8.5% price talk.

Wells Fargo Securities, BofA Merrill Lynch and UBS Securities were the joint bookrunners.

The distribution rate will be fixed until Dec. 15, 2021, at which point it will float at Libor plus 676.6 bps.

Fannie, Freddie come in

Fannie Mae and Freddie Mac preferreds again saw heavy volume, but the securities – which have trended mostly upward since the election – ended weaker.

One source attributed the declines to there being “more sellers than buyers.” He also speculated that it could be profit-taking, as there was no “substantive news” to push the GSEs around.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) waned 21 cents, or 3.35%, to $6.06. In Freddie paper, the 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) dropped 17 cents, or 2.8%, to $5.91, as the 6.55% noncumulative preferreds (OTCBB: FMCKI) lost 25 cents, or 5.26%, to close at $4.50.

Since the election of Donald Trump, the mortgage giants’ preferreds have been – for the most part – climbing higher on hopes the president-elect and the Republican-controlled Congress would address GSE reform in a way that will be beneficial for investors.

However, Trump has not specifically addressed housing reform.

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