Winter storms impacting trading; new deal could come on heels of Morgan Stanley issuance

By Stephanie N. Rotondo

Phoenix, Dec. 9 - As winter storms hit the East Coast, trading in the preferred stock market was muted.

"For a Monday, it was OK," said one market source of the pace of activity.

Still, another trader said the market was "inching forward."

The Wells Fargo Hybrid and Preferred Securities index was up 10 basis points as of midmorning.

"The market was up most of the day," said a source. However, he noted that things "faded in the last hour," driving the Wells Fargo index lower to close off 4 bps.

While there was no chatter of new deals coming this week, a trader speculated that the pipeline was not yet closed off.

"That [Morgan Stanley & Co. Inc.] deal did so well, I wouldn't be surprised if we see something come out," he said.

The New York-based investment bank priced $850 million of 6.875% series F fixed-to-floating rate noncumulative preferred stock on Thursday. The deal came massively upsized from $250 million.

As of Monday morning, the issue was trading at $24.95 bid, par offered, according to a trader.

After the close, a source said the deal was the most actively traded security of the day, with over 1.71 million shares changing hands.

The source said the issue ended flat at $25.045.

Meanwhile, Fifth Third Bancorp's $450 million of 6.625% series I fixed-to-floating rate noncumulative perpetual preferreds - a deal that came Wednesday and freed on Thursday - were seen in a $25.02 to $25.10 context.

However, by the close, the preferreds had fallen 9 cents to $24.95, according to a source.

A trader further remarked that issuers and underwriters might be waiting for the two issues to get cleaned up and put away before bringing another new deal.

Ally comes in

Ally Financial Inc.'s 8.125% series 2 fixed-to-floating rate trust preferreds (NYSE: ALLYPA) fell a dime in active trading on Monday, finishing at $26.75.

A source speculated that a $1 billion debt deal done that week could have been the reason for the decline.

"Maybe somebody was swapping out," he said.

On Dec. 2, the Detroit-based bank sold $1 billion of 2¾% non-callable senior guaranteed notes due 2017. The issue was priced at a discount - 99.622 - to yield 2.875%.

The company could use the proceeds to redeem outstanding debt securities.

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