Public Storage's recent deal rises; Fannie, Freddie gain in early trades, finish weaker

By Stephanie N. Rotondo

Phoenix, March 13 - Preferred stocks were trending higher in early Thursday trading.

The Wells Fargo Hybrid and Preferred Securities index was up 13 basis points as of mid-morning. By the end of business, it was up 28 bps, or about 7 cents on average for $25-par securities.

Atlas Pipeline Partners LP priced a deal late Wednesday, a $110 million offering of 8.25% class E cumulative redeemable perpetual preferred stock units.

The deal was upsized from $75 million and came at the tight end of talk.

A trader saw a $24.57 bid, $24.60 offered market early in Thursday's session.

The deal had yet to free up, the trader said.

As for other recent deals, Public Storage Inc.'s $225 million of 6.375% series Y cumulative preferreds were pegged at $24.85 at midday.

At the close, a market source saw the issue at $25.87 on well over 1 million shares trading.

That deal came Monday.

Fannie Mae and Freddie Mac continued to gyrate around as investors digest a flurry of recent news.

Earlier in the week, a bipartisan Senate group said it had a plan to wind down the two mortgage agencies, which sent the preferred issues into a downward spiral. On Wednesday, it was reported that at least one senator - Republican Pat Toomey of Pennsylvania - believed that shareholders shouldn't be shut out entirely in such a case.

Come Thursday, more chatter was out in regards to court cases involving the GSEs and the government's takeover of nearly all profits.

Fannie, Freddie drop again

Fannie and Freddie preferreds were rebounding in early Thursday trading but gave back those gains to end weaker once again.

There was more turmoil for Fannie and Freddie preferreds on Thursday, as one U.S. senator said the fate of shareholders rested with the courts.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dropped 67 cents, or 5.93%, to $10.63. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) declined 60 cents, or 5.5%, to $10.30, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) lost just a quarter, or 1.89%, to $13.00.

The agencies' preferred shares have taken hits all week as a group of bipartisan senators said they planned to introduce a bill that would wind down the GSEs. Investors got spooked by the news, as the proposed plan has more bipartisan support than previous plans have.

Still, markets sources have speculated that the deal won't get far and that it was really a matter of political posturing ahead of an upcoming election cycle.

On Thursday, Sen. Mike Crapo (R-Ida.) said in a Bloomberg television interview that the bill - which he is co-writing with Senate Banking Committee chairman Tim Johnson - doesn't decide how investors will be treated. Instead, he said he would let the courts decide.

A lawsuit has already been filed by investors who allege that the government's decision to commandeer nearly all of the agencies' profits was illegal.

For his part, Crapo said that private-sector investors should have an opportunity to reap the benefits of the companies' turnaround. That comes on the heels of Sen. Pat Toomey's (R-Pa.) note to Treasury secretary Jacob Lew, in which he said that while he believed in reform, any plan should be mindful of private investors.

HSBC paper gains

HSBC USA Inc.'s preferreds were actively on the rise, even as news came out claiming they were the target of a rate-rigging fine.

The floating-rate series F noncumulative preferreds (NYSE: HUSIPF) increased 12 cents to $20.40, and the floating-rate series G noncumulative preferred shares (NYSE: HUSIPG) gained 16 cents to close at $21.50.

The bank is among a handful of institutions that chose to opt out of rate-rigging settlements with the European Union. The antitrust head of the E.U. is in the process of filing a complaint in regards to that situation.

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