Resource Capital upsizes; Freddie, Fannie preferreds gain as Icahn takes common stock stake

By Stephanie N. Rotondo

Phoenix, June 3 - Preferred stocks retreated in early Tuesday trading and had sunk considerably lower by the market's close.

The Wells Fargo Hybrid and Preferred Securities index was down 4 basis points at mid-morning. At the bell, it was down 51 bps, or nearly 13 cents on average for $25-par issues.

The primary market continued to see deals trickling out despite the weak tone of the overall space.

Resource Capital Corp. announced an offering of at least $75 million series C fixed-to-floating-rate cumulative redeemable preferreds.

A trader said price talk was in the 8.75% area.

The non-rated deal priced shortly before the market closed, coming upsized at $110 million and tighter than previous talk at 8.625%.

In the early gray market, the paper was trading at $24.80 offered, according to a trader. Post-pricing, the issue was quoted at $24.70 bid, $24.75 offered.

Morgan Stanley & Co. LLC and UBS Securities LLC are the joint bookrunners. Deutsche Bank Securities Inc. and Keefe Bruyette & Woods are acting as joint lead managers. MLV & Co. LLC is the co-manager.

The dividend will be fixed until July 30, 2024, at which time it will begin to float at Libor plus 592.7 bps.

Fannie, Freddie gain

In the secondary, Fannie Mae and Freddie Mac paper was moving higher.

Fannie's 8.25% series S fixed-to-floating-rate noncumulative preferreds (OTCBB: FNMAS) were up 24 cents, or 2.34%, at mid-morning at $10.50. Freddie's 8.375% fixed-to-floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) had risen 27 cents, or 2.5%, to $10.97.

However, the preferreds came in some by the end of business. Fannie's series S preferreds ended up 20 cents, or 1.87%, at $10.90, and Freddie's 8.375% preferreds closed up 12 cents, or 1.17%, at $10.38.

It was disclosed Tuesday that billionaire investor Carl Icahn had purchased a $50 million common stock stake in Fannie and Freddie. He purchased the shares from Bruce Berkowitz's Fairholme Funds.

But the mortgage giants were making headlines for other reasons as well. Late Monday, Massachusetts Attorney General Martha Coakley filed a lawsuit against the government-sponsored enterprises, claiming they were in violation of state law because they would not negotiate better terms on home loans.

JPMorgan, Fifth Third price

Both JPMorgan Chase & Co. and Fifth Third Bancorp priced $1,000-par deals late Monday.

JPMorgan brought a benchmark-size - $2.5 billion - offering of 5% $1,000-par series V fixed-to-floating-rate noncumulative preferred stock.

Price talk was initially in the 5.125% area but was later revised to 5%.

A market source said the issue ended the day around par.

JPMorgan Securities LLC led that deal.

As for Fifth Third, it sold $300 million of 4.9% $1,000-par series J fixed-to-floating-rate noncumulative perpetual preferred stock.

Price talk on that issue was also originally in the 5.125% area.

A source pegged the paper at 100.25 at the close.

Deutsche Bank Securities Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the joint bookrunners.

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