Fannie, Freddie shares off despite quarterly profits; Zions sells paper via online auction

By Stephanie N. Rotondo

Phoenix, Aug. 8 - The equity markets turned higher on Thursday, but the preferred stock market continued to drift downward, and activity was muted.

Fannie Mae reported earnings early in the day, following Freddie Mac's earnings release on Wednesday. Despite increased profits, the agencies' preferreds were turning downward.

Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were down a dime, or 2.08%, at midday at $4.71. Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dropped a quarter, or 5.15%, to $4.60.

At the close, the Fannie issue was down 14 cents, or 2.91%, at $4.67, and the Freddie paper had drifted 19 cents, or 3.92%, to $4.66.

Though the mortgage giants have seen a return to profitability - Fannie posted a $10.1 billion profit for the second quarter, while Freddie saw profits of $5 billion - a trader said that most are assuming that the government will continue in its plans to wind them down.

However, the trader noted that with all of the profits the companies are making, the government might take a different route.

"They can't just throw that money away," he said.

Fannie intends to make a $10.2 billion dividend payment to the Treasury in September. Once that payment is made, Fannie will have paid $105 billion to taxpayers, after taking $117.1 billion in 2008.

For its part, Freddie is planning to make a $4.4 billion payment, bringing its total paid to the Treasury up to $41 billion.

Freddie took $71 billion in bailout funds.

Zions sells more $1,000-pars

Zions Bancorporation sold $195.15 million of 7.2% series J fixed-to-floating rate noncumulative perpetual preferreds on Thursday via an online auction.

Deutsche Bank Securities Inc., Goldman Sachs & Co., Macquarie Capital and Zions Direct Inc. are the joint bookrunners, according to a prospectus. Zions Direct is acting as the auction facilitator.

Dividends on the preferreds will be fixed through Sept. 15, 2023. On Sept. 15, 2023, the issue will begin floating at Libor plus 444 basis points. Dividends are payable quarterly.

Proceeds from the offering will be used to fund a previously reported redemption of the 9.5% series C noncumulative preferreds.

The $590 million call was first announced on July 24.

The series C paper (NYSE: ZBPC) closed up 3 cents at $25.56.

Zions is a Salt Lake City-based bank holding company.

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