Treasury sells M&T Bank TARP preferreds at par; JPMorgan prices issue; Fannie, Freddie dip

By Stephanie N. Rotondo

Phoenix, Aug. 20 - Preferred stocks were "off a little bit" as Monday's session got underway, a trader said.

He speculated that the soft tone was due to investors "probably just absorbing the extra [new issue] supply."

The new issue calendar is expected to remain active during the week. On Monday, three new deals were announced.

First, the Department of the Treasury priced late Friday a $381.5 million sale of series A and C fixed-rate cumulative preferreds issued to the agency by M&T Bank Corp. under the Troubled Asset Relief Program.

The $1,000-par securities were priced at par.

Meanwhile, JPMorgan Chase & Co. launched a $1.1 billion offering of 5.5% series O noncumulative preferred stock, according to market sources.

Price talk was around 5.625%, according to a trader, but was revised to 5.5%. The deal was expected to be as large as $1.2 billion.

In the secondary, there was "big activity" in Fannie Mae and Freddie Mac, a market source reported. The mortgage giants' preferreds have been on the active side since Friday, when the federal government announced a new wind-down plan for the companies.

M&T TARP preferreds sold

On Friday, the Treasury sold $1,000-par series A and C fixed-rate cumulative preferreds issued to it by M&T Bank under the TARP program.

A trader said both series were bid for at par.

A planned amendment will result in the initial 5% dividend rising on Nov. 14, 2013 for both series to 6.375%. The amendment will allow for a redemption of the preferreds at any time on or after Nov. 15, 2018 or within 90 days of a regulatory capital treatment event.

M&T will apply to list the securities on the New York Stock Exchange under the ticker symbols "MTBP" and "MTBPC," respectively. Settlement is expected Tuesday.

Bank of America Merrill Lynch, Sandler O'Neill + Partners, LP, RBC Capital Markets, LLC and Stifel, Nicolaus & Co., Inc. are the joint bookrunning managers. The co-managers are MR Beal & Co. and Rice Securities LLC.

Buffalo-based M&T will not receive any proceeds from the sale of these securities.

JPMorgan prices preferreds

JPMorgan Chase priced a $1.1 billion sale of 5.5% series O noncumulative preferreds on Monday.

The size was expected to be between $500 million and $1.2 billion.

A trader saw the issue trading at $24.87 in the gray market at midday, though he added that the paper had traded as high as $24.98.

Another market source said he heard the securities had traded between $24.85 and $24.92.

J.P. Morgan Securities LLC is the bookrunning manager. Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are the joint lead managers.

The New York-based bank will apply to list the new series of preferreds on the New York Stock Exchange.

Proceeds will be used for general corporate purposes, including the repayment of debt, investments in or extensions of credit to subsidiaries, redemptions or possible acquisitions.

Fannie, Freddie decline

Fannie and Freddie experienced "big activity" again on Monday, according to a source. The companies' preferred stock began trading in hefty size Friday when the Treasury unveiled new terms for its bailout of the government-backed mortgage buyers.

And, like Friday's session, the preferreds were posting sizeable losses, though not nearly as much as seen on Friday.

Freddie's 8.375% fixed-to-floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dropped 6 cents, or 5.83%, to 97 cents. Fannie's 8.25% fixed-to-floating-rate noncumulative series S preferreds (OTCBB: FNMAS) declined 19 cents, or 18.1%, to 86 cents, and the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) fell 22.5 cents, or 17.65%, to $1.05.

The Treasury said Friday that it will require that the companies decrease their mortgage portfolios by 15% per year, up from 10%.

Additionally, the new terms would cancel a 10% dividend on investments sold to the Treasury, with the government instead taking any profits the mortgage giants post.

Earlier this month, Freddie reported a $3 billion quarterly profit, while Fannie posted a $5 billion profit.

The companies were taken over by government conservators in September 2008. Since that time, they have taken nearly $150 billion of taxpayer funds.

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