Investors return from holiday weekend to find new Alabama Power deal; Fannie, Freddie soften

By Stephanie N. Rotondo

Seattle, Sept. 5 – As market players began to return from a long holiday weekend, the preferred stock market offered up a new deal to get things moving on Tuesday.

Alabama Power Co. brought a $250 million offering of 5% class A cumulative preferred stock to market.

The issue priced tighter than the 5.125% price talk.

Additionally, as pricing occurred prior to the market’s close, the issue had already freed to trade, according to a market source.

The temporary ticker is “ABBLP.”

At the bell, the issue was seen at $24.97. Shortly after pricing, however, a trader had quoted the paper at $25.02 bid, $25.08 offered.

That compared to $24.75 bid, $24.90 offered in the early gray market.

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

The Birmingham, Ala.-based power company plans to use the proceeds to redeem some or all of the company’s $50 million of 6.5% series preference stock (OTCBB: ALAWP), as well as some or all of the $150 million outstanding 6.45% series preference stock (OTCBB: ALBMP).

If there are any remaining funds, they will be used to redeem some or all of the company’s $38 million of 5.83% class A preferred stock (NYSE: ALPPrO) and for general corporate purposes.

On the heels of the new issue announcement, the company’s existing paper was in decline.

The 6.5% preferreds were down 65 cents, or 2.48%, at $25.55. The 6.45% paper was off 55 cents, or 2.10%, at $25.55.

And, the 5.83% preferreds were down $1.96, or 6.98%, at $26.10.

Of the Alabama Power issues, the new deal was among the day’s most actively traded securities. While the older issues were not overly active, each of them did see well above-average trading for the day.

Away from Alabama Power, Fannie Mae and Freddie Mac’s preferreds were in retreat on chatter that housing finance reform would be taking a backseat to other issues now that Congress is back in session.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) slipped 4 cents to $6.46. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) lost a dime, or 1.59%, to close at $6.20.

Despite promises that housing and GSE reform would be done by the end of the year, market commentators are now suggesting that it will once again be pushed out. Instead, Congress will be focused on budget issues – including raising the debt limit – and tax reform.

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