Arch Capital upsizes new deal, tightens yield; Cherry Hill, Invesco firm; secondary strong

By Stephanie N. Rotondo

Seattle, Aug. 14 – The preferred stock primary market wasn’t wasting any time as the week started.

Arch Capital Group Ltd. announced early Monday that it was selling $150 million of series F noncumulative preferreds, the proceeds of which would be used to redeem the company’s 6.75% series C noncumulative preferreds (NYSE: ARHPrC).

After the close, the company said it had sold an upsized $200 million of the preferreds at par to yield 5.45%.

Initial price talk was 5.5% but was later revised to 5.45%.

Just ahead of pricing, a trader saw the paper quoted at $24.65 bid, $24.75 offered in the gray market.

As for the series C preferreds, they declined 8 cents to $25.32 on above-average trading volume.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, Wells Fargo Securities LLC and J.P. Morgan Securities LLC ran the books.

From last week’s business, Cherry Hill Mortgage Investment Corp.’s $55 million of 8.2% series A cumulative redeemable preferreds were on the active side, trading up a dime to $24.80.

The deal priced Thursday. A temporary ticker of “CHMMP” was given to the issue on Friday after the deal freed from the syndicate.

The company’s inaugural issue came tighter than the 8.25% price talk.

Morgan Stanley and RBC Capital Markets LLC were the bookrunners.

Invesco Mortgage Capital Inc.’s $250 million of 7.5% fixed-to-floating rate series C cumulative redeemable preferred stock – a deal priced Wednesday – were meantime seen at $24.95, up 13 cents on the day.

That issue also has a temporary symbol, “IVSOP.”

The deal came at the tight end of the revised 7.5% to 7.625% price talk. Initially, price talk was 7.625%.

Morgan Stanley, BofA, UBS Securities LLC and JPMorgan ran the books.

Secondary gets a boost

As for secondary trading, the market was having a positive day, following the broader markets higher, as concerns about North Korea abated.

The Wells Fargo Hybrid and Preferred Securities index firmed 35 basis points, while the U.S. iShares Preferred Stock ETF was up 52 bps.

Morgan Stanley & Co. Inc.’s 5.85% series K fixed-to-floating rate noncumulative preferreds (NYSE: MSPrK) dominated the day’s trading, even beating out recently priced deals.

The preferreds ended the session up 28 cents, or 1.04%, at $27.12, on 1.13 million shares traded.

There was no news to cause the surge in activity or the upward momentum.

Fannie Mae and Freddie Mac’s paper, however, bucked the day’s trend, closing weaker.

Like Morgan Stanley, there was no fresh news to act as a catalyst.

Fannie’s 8.25% series S fixed-to-floating rate preferreds (OTCBB: FNMAS) dipped 8 cents, or 1.16%, to $6.80. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) waned 4 cents to $6.50.

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