PS Business prices deal; Public Storage frees up; Fannie, Freddie swing wildly; GMX dives

By Stephanie N. Rotondo

Phoenix, March 5 - The preferred stock market was firming Tuesday as the Dow Jones industrial average broke through all-time highs.

A market source even noted that liquidity was "better than it has been," propelled in part by a flurry of fresh news.

On the heels of Public Storage's new deal priced on Monday, PS Business Parks Inc. - a fellow real estate investment trust - announced an offering of series V cumulative preferreds. The deal priced at par to yield 5.7%, with $100 million of the preferreds being sold.

Only $75 million of the preferreds were expected.

In the secondary, Fannie Mae and Freddie Mac's preferreds gyrated on news the Federal Housing Finance Agency was looking to merge "back-office" operations of both entities. According to one market source, the effort is the first step in an ultimate wind-down of the government-owned mortgage backers - which "would be bad for preferred holders."

PS Business prices

PS Business Parks brought a $100 million offering of 5.7% series V cumulative preferreds on Tuesday.

Ahead of pricing, a trader said he had not seen any real details on the new issue, aside from the fact that at least $75 million preferreds are expected to be sold.

He saw the preferreds at less 20 bid in the gray market at midday. Post-pricing, he placed the issue at $24.80 bid, par offered.

Another source said the deal went "pretty well" but opined that the market was closer to $24.80 bid, $24.90 offered.

Public Storage frees to trade

For its part, Public Storage's $200 million of 5.2% series X cumulative preferreds were quoted at $24.80 bid, $24.85 offered at midday. The issue then freed around 2:30 p.m. ET, according to a source.

The source pegged the preferreds at $24.80 bid, $24.88 offered.

Public Storage holds a "significant" stake in PS Business Parks, according to a regulatory filing.

Fannie, Freddie volatile

Fannie Mae and Freddie Mac's preferreds traded wildly on Tuesday following news regarding a speech given by the head of the FHFA on Monday.

In his speech, Edward DeMarco said that he wanted to merge "back-office" operations of the two companies. In doing so, a new entity would be created, complete with its own chief executive and board of directors.

One market source said the move was a first step in a total liquidation of the government-owned mortgage backers. If that proves true, he said, it will be bad for preferred holders.

"Can you say zero?" he said of possible preferred recoveries.

Because the government currently owns senior preferreds - many billions of them, in fact - there would be little left over for other stakeholders, the source explained.

Still, he said he thought the effort would go through.

"I think what they have offered will make a lot of sense politically," he said. "And I bet it sticks."

The source remarked that at one point post-news, Fannie Mae and Freddie Mac's preferreds were up - "though I can't imagine why."

Another source said he had expected a bigger sell-off, noting that overall volumes in the name were not huge.

Of the most actively traded issues, Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) hit a low of $1.75 and a high of $2.10 before ending down 19 cents, or 8.68%, to $2.00. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) traded as low as $1.76 and as high as $2.06, but closed at $2.00 as well, down 8 cents, or 3.85%.

"I would have thought it would be less than $1.00," a source said of the day's closing prices.

PartnerRe busy ahead of call

PartnerRe Ltd.'s 6.75% series C cumulative redeemable preferreds (NYSE: PREPC) were trading quite busily ahead of a March 18 call.

The issue was up a penny at midday at $25.07.

The Pembroke, Bermuda-based reinsurance company will use proceeds from a Feb. 11 offering of $250 million 5.875% series F noncumulative redeemable perpetual preferreds (NYSE: PREPF).

That paper ended the day at $24.97, down a penny.

GMX preferreds dive

GMX Resources Inc.'s 9.25% series B cumulative preferreds (NYSE: GMXR-P) were losing big, just one day after the company said it was skipping an interest payment on its senior secured second-priority notes due 2018.

The preferreds were off by $2.21, or 32.94%, as of midday, trading at $4.50. At the close, the issue was down $1.96, or 29.21%, at $4.75.

The straight equity (NYSE: GMXR) was meantime off 14 cents, or 5.53%, at $2.39.

There was no trading in the company's bond issues.

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