Fannie, Freddie in focus, decline; Atlas Pipeline to bring new deal; Public Storage gains

By Stephanie N. Rotondo

Phoenix, March 12 - Preferred stock investors continued to focus on Freddie Mac and Fannie Mae Wednesday in the wake of a new plan put forth by a bipartisan Senate group.

The agencies' preferreds were "jumping all over," a trader said, seeing the $25-par securities down about $1.00 early in the session.

"It's still an ugly picture for them," another market source said. "I think the phrase would be 'ouch.'"

The source said that the most actively traded issues were down 7.75% to 8.4%. On average, he said the preferreds had dropped 8.5% to 9.5%.

Others, he said, were down "only a touch - like not quite 2%, which is still a lot."

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dropped 95 cents, or 7.76%, to $11.30. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined a dollar, or 8.4%, to $10.90, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) lost just a quarter, or 1.85%, to $13.25.

On Tuesday, a group of senators said it had a new bipartisan plan to wind down the mortgage giants. Though the preferreds initially turned higher, the market eventually pushed the paper downward, and those declines continued into Wednesday trading.

However, a trader said he doesn't think the deal will get very far, opining that it was simply a way to remove the Freddie/Fannie issue from the ballots come this election cycle.

"This plan has no legs," he said.

Though investors are obviously concerned that they will reap nothing from their investment, there could still be hope. In a letter to Jacob Lew, Treasury Secretary, senator Pat Toomey, a Republican from Pennsylvania and a member of the Senate Banking Committee, said he thought investors should not be shut out.

"While I strongly support GSE reform that protects taxpayers, such efforts should also be mindful of investors in addition to other considerations," Toomey wrote to Lew. "Taxpayers should be fully compensated, but once they are, investors, such as the York County pension fund in Pennsylvania, should not be denied their fair share of any remaining value."

As for the preferred space overall, the Wells Fargo Hybrid and Preferred Securities index was trading down 6 basis points as of mid-morning. However, it came back to end up 17 bps, or just over 4 cents on average for $25-par paper.

Atlas to price units

In the primary, Atlas Pipeline Partners LP announced plans to sell at least $75 million of class E cumulative redeemable perpetual preferred units.

Price talk is 8.25% to 8.375% on the non-rated deal, a trader said.

Morgan Stanley & Co. LLC and UBS Securities LLC are the joint bookrunners. Stifel Nicolaus & Co. is the joint lead manager, and MLV & Co. LLC is the co-manager.

A trader said he had yet to see any gray markets for the units.

Also, Public Storage Inc.'s $225 million of 6.375% series Y cumulative preferreds - a deal that priced late Monday - was moving up, as a trader pegged the recent deal at $24.84.

After the bell, a source saw the issue closing at $24.78, on well over 1 million shares traded.

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