Allstate sells upsized noncumulative preferreds; JPMorgan slips ahead of investor day

By Stephanie N. Rotondo

Phoenix, Feb. 24 - The preferred stock market was trading flat early in Monday's session, based on how the Wells Fargo Hybrid and Preferred Securities index was trading as of midday. However, by the end of business the index had dipped 12 bps, or about 3 cents on average for $25-par paper.

The Allstate Corp. added a deal to the new issue calendar, announcing an offering of series E noncumulative perpetual preferred stock. Price talk was around 6.75%, according to a trader.

"They will probably tighten the yield, I'm guessing," he said.

In the gray market, the paper was already "doing well," with the trader seeing the preferreds around $24.75.

The trader proved to be correct when the company revised talk to 6.625% to 6.75% just after lunchtime. The deal was also upsized to $650 million from an expected $200 million.

"When they upsized it, it faded," a market source said, seeing a $24.87 trade in the gray market.

After the price revision, the first trader said the 6.625% preferreds were bid for at $24.75.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities LLC led the offering.

As for the company's existing preferreds, they were all weaker on the day.

The 5.625% series A fixed-rate noncumulative preferreds (NYSE: ALLPA) dropped 38 cents, or 1.66%, to $22.57, while the 5.1% fixed-to-floating rate subordinated debentures due 2053 (NYSE: ALLPB) fell a nickel to $24.46. The 6.75% series C noncumulative preferreds (NYSE: ALLPC) - the most active of the Allstate structure - lost 26 cents, or just over 1%, ending at $25.54.

And, the 6.625% series D noncumulative preferreds (NYSE: ALLPD) closed down 20 cents at $25.30.

The Northbrook, Ill.-based insurance company intends to use proceeds from the sale for general corporate purposes.

JPMorgan slips

JPMorgan Chase & Co.'s preferreds were softer during the day's session, just one day before the New York-based bank's annual investor day.

The 5.45% series P noncumulative preferreds (NYSE: JPMPA) declined 4 cents to $21.56, as the 6.7% series T noncumulative preferreds (NYSE: JPMPB) lost 3 cents to close at $25.01.

The 5.5% series O noncumulative preferreds (NYSE: JPMPD) dipped 4 cents to $21.66.

Market analysts are not expecting the investor day to provide any overly positive news. The company is expected to discuss each of its business units and how they are performing. Spending and capital levels are also slated to be on the agenda.

Verizon to list

Verizon Communications Inc.'s $500 million of 5.9% $25-par notes due 2054 are slated to be admitted to the New York Stock Exchange at midweek, according to a market source.

The deal came Jan. 30, and the expected ticker symbol is "VZA."

A trader saw that issue offered at $25.05 in early trades, though he speculated that "it's probably lower now."

Verizon is based in New York.

Fannie, Freddie mostly higher

Fannie Mae and Freddie Mac preferreds were mostly firm on Monday following Fannie's fourth-quarter earnings release on Friday.

Fannie reported net income of $6.5 billion for the fourth quarter.

Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were 5 cents weaker on the day at $10.35. However, the 8.25% series T noncumulative prefereds (OTCBB: FNMAT) rose 8 cents to $11.47.

Sector peer Freddie saw its 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) rise a dime to $10.70.

For 2013, Fannie's net income was $84 billion.

Because of a revised agreement related to its 2008 bailout, Fannie is required to pay out a portion of its profit to the federal government. As such, the mortgage giant plans to make a $7.2 billion dividend payment.

In doing so, Fannie will have finally repaid taxpayers the $116.1 billion it took in bailout funding.

For its part, Freddie took $71.3 billion in bailout dollars.

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