Midday Commentary: AmTrust Financial's new deal eyed; Fannie, Freddie in focus in secondary

By Stephanie N. Rotondo

Phoenix, June 4 - A trader said preferred stocks were "coming back" in Tuesday trading, following the previous week's sell-off.

In the primary, AmTrust Financial Services Inc.'s new $115 million of 6.75% series A noncumulative perpetual preferreds were seen around $24.70 at midday.

The deal priced late Monday, coming in line with price talk and upsized from $100 million.

"It'll probably free up today," a trader said.

Meanwhile, secondary dealings were focused on Fannie Mae and Freddie Mac.

"Fannie and Freddie are all jumping," a trader said. On Monday, Guggenheim released a research note that indicated preferred holders probably would not see much recovery in the event the government-backed mortgage giants are liquidated. But the trader remarked that another report said that there could be money left over for such holders, though it was unclear just how much they might get back.

Bloomberg reported Tuesday morning that a bipartisan group of senators was polishing a new bill that would liquidate the agencies and create one single company. In the event of liquidation, the U.S. Treasury would get its money first.

Freddie's 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) were up 50 cents at midday, or 8.29%, at $6.53. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 60 cents, or 10%, at $6.60.

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