STAG Industrial, MFA Financial rise; Fannie, Freddie boosted by new Obama budget details

By Stephanie N. Rotondo

Phoenix, April 10 - There were no new preferred stock issues announced on Wednesday, which a trader said was due to a combination of things.

Firstly, the Federal Reserve released minutes from its last meeting, which "suggested they are going to continue buying assets to keep rates at these levels." Issuers were likely waiting for the release before putting out a new deal.

The trader also noted that a women's syndicate meeting was getting ready to start in New York. The Women's Syndicate Association's Annual Cocktail Reception is scheduled for April 18, according to the group's website.

And, with many financials getting ready to report earnings at the end of this week, "we probably won't see any new deals [from banks] until after that."

As for the week's new deals, STAG Industrial Inc.'s $62.5 million of 6.625% series B cumulative redeemable preferreds - a deal that priced Tuesday - was quoted at $24.85 bid, par offered.

"I haven't seen it free yet," a trader said.

MFA Financial Inc.'s newly priced $175 million issue of 7.5% series B cumulative redeemable preferreds, however, did free up late Tuesday, according to a trader.

The trader pegged that paper at $24.80.

In the secondary, a trader remarked that a new budget unveiled by president Barack Obama on Wednesday indicated that income from Freddie Mac and Fannie Mae could be as high as $51 billion. That fueled speculation that the agencies might be kept around as a "cash cow," he said.

The agencies' preferreds were nearing the $5-mark on the back of the news.

And, First BanCorp of Puerto Rico announced it had scrapped a common stock-for-preferred stock exchange of five series of noncumulative preferreds on Wednesday. The bank said the cancelled swap was due to a failure to win investor approval for the deal.

Gains for Fannie, Freddie

A new federal budget released on Wednesday indicated that mortgage giants Fannie and Freddie will have paid $51 billion more than it had received in federal aid by 2023.

Last year's budget projections showed a $28 billion loss through 2022.

On the back of the news, the agencies' preferreds - which have been dominating trading anyway and have risen precipitously over the last few weeks - were again taking center stage.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) increased by 43 cents, or 9.56%, to $4.93. Fannie's 8.25% series S fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FNMAS) rose 40 cents, or 8.89%, to $4.91.

In 2012, Fannie reported net income of $17.2 billion, while Freddie reported a profit if $11 billion. Both firms will only be able to keep $3 billion of that amount, with the rest going back to taxpayers.

Since being seized by government regulators in 2008, Fannie and Freddie have received $187.5 billion from the Treasury. About $65.2 billion has been paid back in dividends.

First BanCorp drops exchange

Puerto Rico's First BanCorp nixed an exchange offering that would have swapped five series of noncumulative preferreds for 10.08 million shares of common stock.

On that news, the preferreds in questions were mostly softer. The 7% series E noncumulative perpetual monthly income preferreds (OTCBB: FBPRL) were down the most, losing $1.15, or 5.37%, to close at $20.45. Still, that was 15 cents better than midday trading levels.

The 7.125% series A noncumulative perpetual monthly income preferreds (OTCBB: FBPRP) were meantime off 50 cents, or 2.33%, to $21, while the 8.35% series B noncumulative perpetual monthly income preferreds (OTCBB: FBPRO) lost 80 cents, or 3.68%, to end at $20.95.

However, the 7.25% series D noncumulative perpetual monthly income preferreds (OTCBB: FBPRN) rose 26 cents, or 1.22%, to $21.50. The 7.4% series C noncumulative perpetual monthly income preferreds (OTCBB: FBPRM) managed to move higher after trading down at midday, ending up 55 cents, or 2.72%, at $20.75.

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