Colony Capital frees to trade; Banc of California lists on NYSE; Alabama Power dips

By Stephanie N. Rotondo

Phoenix, April 9 – The preferred stock market started strongly Thursday but started to drift in by the end of business.

The Wells Fargo Hybrid and Preferred Securities index ended flat after being up 11 basis points at mid-morning.

The market’s move came just one day after the Federal Reserve released minutes from its last meeting. The minutes indicated that members were mixed on whether to begin raising interest rates in June or not.

A trader said Colony Capital Inc.’s new 7.125% series C cumulative redeemable perpetual preferreds – a $250 million deal that came Wednesday – freed to trade early in the session.

He quoted the issue at $25.06 bid, $25.12 offered at mid-morning.

After the close, the shares were pegged at $25.05 bid, $25.08 offered.

Price talk on the new issue was initially 7.25% but was then revised to 7.125%. Additionally, the deal was upsized from $75 million.

Among other recent deals, Banc of California Inc.’s $100 million of 7.375% series D noncumulative perpetual preferred stock began trading on the New York Stock Exchange on Thursday under the ticker symbol “BANCPD.”

The deal priced March 31.

Paper was trading at $25.41 at mid-morning, up from opening levels of $25.30. However, echoing the trend of the market, the issue came in by the end of the day, closing at $25.32.

Alabama Power redemptions

Away from new issues, Alabama Power Co. announced that it was selling additional series 2015A 3.75% senior notes due 2045 – $550 million of which were sold March 11 – as well as a new issue to be designated as series 2015B.

The company sold a total of $425 million of the two series of notes.

Proceeds from the offering will be used to redeem in whole or in part three series of the company’s outstanding preferreds: the 5.3% class A cumulative preferreds (NYSE: ALPPP), the 5.2% class A cumulative preferreds (NYSE: ALPPN) and the 5.625% noncumulative preference stock (OTCBB: ALBPP).

On the news, the 5.3% preferreds were off 32 cents, or 1.25%, at $25.30, while the 5.2% preferreds were down 11 cents at $25.40.

The noncumulative issue was trading off 52 cents, or 2.1%, to $25.16.

Fannie, Freddie mixed

Fannie Mae and Freddie Mac preferreds remained actively traded on Thursday as investors continued to react to news out Wednesday regarding senator Charles Grassley and his questions about the government’s decision to take over the agencies’ profits.

But while the preferreds ended the previous session with a firmer tone, they finished Thursday’s session mixed.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were 3 cents higher at $4.49, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) were a nickel lower at $6.95.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) finished unchanged at $4.50.

Shareholders have filed several lawsuits against the government over its 2012 decision to take the majority of Fannie and Freddie’s profits as the agencies continue to operate under conservatorship. In the course of those lawsuits, certain documents have been requested from the government, but each request has gone unanswered. In some cases, the government has even claimed presidential privilege.

In particular, shareholders are looking for documents relating to the 2012 decision, but thus far, none have come.

In his letter, Grassley also expressed questions about the decision and asserted that taxpayers have “a right to know what has transpired.”

“But, instead of transparency, there appears to be an invocation of executive privilege. If true, this is cause for concern,” Grassley wrote in his letter.

Since the decision, Fannie and Freddie have proved to be quite profitable for the Treasury. After the two GSOs received $187.5 billion in 2008, the market began to stabilize and the companies began to return to profitability. As of March 31, 2015, Fannie and Freddie have repaid a total of $228.3 billion back to taxpayers, over $40 billion more than it originally received.

With the bulk of their profits being taken away, the ability to create a capital cushion has been near impossible and recoveries for shareholders are believed to be nil.

In his letter, Grassley gave the Justice and Treasury departments until April 20 to respond.

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