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Midday Commentary: Fannie, Freddie nosedive on wind-down plan; Hatteras frees up; Wells Fargo lists
By Stephanie N. Rotondo
Phoenix, Aug. 17 - Fannie Mae and Freddie Mac were in the news again Friday as the federal government unveiled a plan that would wind down the mortgage giants.
Under the terms of the plan, the government would take all profits from the agencies in order to pay back taxpayers.
The news did not bode well for the company's preferreds, according to a trader.
"They're all down 70% to 80% today," he said. Investors are not only wondering if the government intends to bankrupt Fannie and Freddie once the plan ends, but also if the preferreds will ever be worth anything or "is it just dead money?"
Freddie's 8.375% fixed-to-floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dropped $1.59, or 56.18%, to $1.24. Fannie's 8.25% fixed-to-floating-rate noncumulative series S preferreds (OTCBB: FNMAS) fell $1.32, or 56.17%, to $1.03, and the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) declined $1.55, or 58.49%, to $1.10.
A trader said Hatteras Financial Corp.'s new $250 million of 7.625% series A cumulative redeemable perpetual preferred stock freed from the syndicate on Friday. The deal priced Thursday.
The trader said the issue was trading at $24.85 at midafternoon.
Meanwhile, Wells Fargo & Co.'s $675 million of 5.2% class A noncumulative perpetual preferred stock, series N, were admitted for trading on the New York Stock Exchange under the symbol "WFCPN." The securities priced Aug. 9.
At midday, the preferreds were trading at $24.99, down 8 cents from the open.
"I'm still hearing there's a busy new issue market," a trader said of the coming weeks.
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