GE Capital sells upsized $750 million notes; Capstead free to trade; Fannie, Freddie firm

By Stephanie N. Rotondo

Phoenix, May 9 - After spending most of the week on the up side, the preferred stock market ended the day slightly down, a market source said Thursday.

However, volume was heavier than usual, though centered on a few names.

The primary market saw a new deal announced from General Electric Capital Corp.

The Norwalk, Conn.-based company said it would offer $25-par 40-year senior notes, with initial price talk at 4.75% to 4.875%.

"They might adjust it down or even bring it at 4.7%," a trader said.

The company did in fact bring the paper at 4.7%, upsizing to $750 million from $250 million.

Meanwhile, Capstead Mortgage Corp.'s $150 million of 7.5% series E cumulative redeemable preferreds freed from the syndicate on Tuesday.

The deal priced Wednesday.

Away from new deals, a trader said the secondary market was "quiet with the exception of Fannie Mae and Freddie Mac."

Fannie reported yet another record profit on Thursday, following Freddie's own earnings release on Wednesday. Both agencies saw their preferreds gain ground as a result.

GE prices $25-par notes

A market source said that a new issue from GE Capital was the "big thing" in the primary market on Thursday.

The company announced and then priced $750 million of 4.7% $25-par senior notes due 2053.

At midday, the gray market was around $24.85, according to a trader.

After the close, a source quoted the issue at $24.97 bid, $25.02 offered.

The company intends to use the proceeds for general corporate purposes.

GE's 4.875% $25-par notes due 2053 - a deal that priced Jan. 29 - were busy, but weaker as the new issue came.

The notes (NYSE: GEH) dropped 16 cents to $25.60.

Capstead frees

Capstead Mortgage's new $150 million issue of 7.5% series A cumulative redeemable preferreds freed to trade Thursday after pricing on Wednesday.

A trader pegged the preferreds at $24.90 bid.

The Dallas-based real estate investment trust will use the proceeds together with cash on hand to redeem all or a portion of outstanding series A and B preferred shares. If the company chooses to forgo the redemption, the funds will be used for general corporate purposes.

The $1.26 series B cumulative convertible preferreds (NYSE: CMOPB) were active, but unchanged at $12.59.

Fannie earnings a record

Fannie and Freddie preferreds were again dominating the secondary preferred space, following Fannie's earnings release.

Over 6.9 million of Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) changed hands, rising 35 cents, or 7.45%, to $5.05.

In Fannie paper, the 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) saw trading of over 15.9 million shares. The issue put on 36 cents, or 7.84%, to end at $4.95.

And, Fannie's 8.25% series T noncumulative preferreds (OTCBB: FNMAT) closed up 65 cents, or 12.15%, at $6.00. Over 1.3 million shares were traded during the session.

Fannie reported pretax income of $8.1 billion in the first quarter. Because of a $50.6 billion reversed writedown on assets, net income came to $58.7 billion.

The mortgage agency had posted a $2.7 billion profit in the previous quarter.

The firm is expected to pay $59.4 billion to the Treasury Department due to its return to prosperity.

Fannie's earnings came on the back of Freddie's numbers, which came out on Wednesday. Freddie reported net income of $4.6 billion for the first quarter of 2013, its second best quarter ever. The agency's net worth totaled $10 billion. Under the rules of its conservatorship, the mortgage guarantor must pay anything over $3 billion to the U.S. Department of Treasury.

Freddie also announced on Thursday that it was planning to issue up to $1 billion of non-agency mortgage bonds this month. Another $1 billion are expected to be sold in June, and the agency could sell as much as $5 billion this year.

The sales will help Freddie reduce its holdings of illiquid assets, as per regulatory requirements.

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