Apollo Global frees to trade, holds steady; Chimera preferreds list on NYSE; GSEs higher

By Stephanie N. Rotondo

Seattle, March 1 – The preferred stock market was starting the new month with a weaker tone, even as the rest of the market was inching higher on increasing expectations of an interest rate hike later this month.

“We were down a little bit with the bond market selling off,” one trader said.

“Yes, we followed Treasuries lower, but we significantly outperformed them,” said another market source.

Still, there was some improvement over the course of the day.

The Wells Fargo Hybrid and Preferred Securities index closed down 27 basis points, through it was down 41 bps at mid-morning. The U.S. iShares Preferred Stock index was meantime 21 bps lower, compared to off 43 bps in earlier dealings.

Apollo Global Management LLC’s $250 million of 6.375% series A preferred stock – a deal priced Tuesday – freed to trade early in the day, according to a market source.

A source said the preferred ended the day at $24.90, which was also the volume weighted average price.

Earlier in the day, a trader said the paper was quoted as high as $24.93 bid, $24.95 offered, but as the preferred space pulled back, so did the new issue.

At mid-morning, he said the preferreds were “holding” around $24.87.

Price talk was initially in the 6.5% area but was revised to 6.375%, according to a source.

The deal came upsized from $150 million.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC ran the books.

Meanwhile, Chimera Investment Corp.’s $300 million of 8% series B fixed-to-floating rate cumulative redeemable preferred stock began trading on the New York Stock Exchange on Wednesday, as was expected.

The ticker is “CIMPrB.” The deal priced Feb. 22.

The issue ended at $24.89, which compared to $24.95 at the open.

Morgan Stanley, UBS, RBC Capital Markets and Keefe Bruyette & Woods Inc. led that deal.

“We were hearing that a [real estate investment trust] might be coming [to market],” the trader said. “But it never materialized this morning.”

The trader speculated that with the market being down, the issuer – possibly Public Storage, though “that could just be conjecture,” he said – might be waiting for things to turn back around.

Deeper in the secondary, GSE preferreds were “catching a bid,” a trader said.

Freddie Mac’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) rose 27 cents, or 3.46%, to $8.07. Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were also better, adding 20 cents, or 2.42%, to close at $8.45.

But while Fannie and Freddie bucked the day’s overall trend, Morgan Stanley & Co. Inc.’s 5.85% series K fixed-to-floating rate noncumulative preferreds (NYSE: MSPrK) drifted down a nickel to $25.80.

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