Preferred stock investors play waiting game as Greek saga unravels; PartnerRe improves

By Stephanie N. Rotondo

Phoenix, July 7 – Preferred stock investors continued to sit on the sidelines early Tuesday, as the world remained focused on the ongoing Greek drama.

Talk is that there is a verbal debt deal on the table and that Greece will formally propose the deal to E.U. officials on Wednesday. As hopes increase that a deal will get done, Treasury bonds are improving and taking preferreds along with it.

A trader said the bond market was up 1.5 points early in the day, while the Wells Fargo Hybrid and Preferred Securities index inched up 6 basis points.

The index was up 2 bps at mid-morning.

Though liquidity was on the light side, JPMorgan Chase & Co.’s (NYSE: JPMPG) series G preferreds were rather active, with about 667,000 shares being exchanged.

The preferreds – which will be added to the S&P U.S. Preferred Stock index on July 17 – ended the day a penny higher at $24.93.

JPMorgan’s (NYSE: JPMPF) series F preferreds were also somewhat busy, though the shares ended a touch weaker.

About 489,000 preferred shares traded, finishing off 2 cents at $25.16.

PartnerRe rises

PartnerRe Ltd.’s preferreds got a sizable boost Tuesday after EXOR SpA sweetened a buyout offer for the Pembroke, Bermuda-based reinsurance company.

The 6.5% series D cumulative redeemable preferreds (NYSE: PREPD) closed up 43 cents, or 1.7%, at $25.70, while the 7.25% series F cumulative redeemable preferreds (NYSE: PREPE) improved 42 cents, or 1.61%, to $26.54.

In an improved offer announced Tuesday EXOR said it would exchange PartnerRe’s existing preferreds with new preferred securities that offer call protection until 2021 and a 100 bps increase on any dividends.

EXOR, an Italian investment company, first made its unsolicited bid for PartnerRe in May. That proposal was rejected.

Back in January, PartnerRe and Axis Capital Holdings had agreed to merge. EXOR is claiming that its offer – valued at $6.8 billion in cash – is the better deal for shareholders.

However, PartnerRe’s board has expressed reservations about the deal and has said that EXOR refuses to discuss the concerns with the board.

As such, PartnerRe is encouraging investors to vote in favor of the Axis deal at a meeting on July 24.

Fannie, Freddie rebound

Despite the modest strength seen in the market, a trader noted that Fannie Mae and Freddie Mac paper was selling off early Tuesday. He wasn’t sure what was sparking the move, speculating that “there must be something going on in the courts.”

However, the preferreds rallied by the end of the day, closing in positive territory.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) closed at $3.90, up 12 cents, or 3.17%. The shares were off a dime, or 2.65%, at $3.68 at mid-morning.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were meantime seen ending up 7 cents, or 1.83%, at $3.89. That issue was down 15 cents, or 3.93%, at $3.67 in earlier trading.

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