Preferred stocks finish flat; CHS, Vanguard deals free to trade; JPMorgan prices deal

By Stephanie N. Rotondo

Phoenix, March 5 - The preferred stock market gyrated throughout the midweek session, trading in "a very narrow range" all day, a market source said.

Still, with all the gyrations, the Wells Fargo Hybrid and Preferred Securities index ended the day flat.

But the primary market was not doing too badly, as CHS Inc.'s $365.22 million of 7.1% series 2, class B cumulative redeemable preferreds freed to trade.

The issue priced late Tuesday, though the deal had been expected since mid-February.

"It was very hot," a trader said, seeing the new issue already trading north of par.

He pegged the deal at $25.30 bid.

Another source said there wasn't much of the issue that was trading, though he quoted the paper at $25.25 bid, $25.35 offered.

BofA Merrill Lynch and Wells Fargo Securities LLC are the joint bookrunners. Lead manager is D.A. Davidson & Co.

Dividends will be payable on the last day of March, June, September and December. Beginning March 31, 2024, the dividend will be calculated on a floating-rate basis at Libor plus 429.8 basis points.

Meanwhile, Vanguard Natural Resources LLC's $175 million of 7.625% series B cumulative redeemable perpetual preferred units - another deal that priced Tuesday - freed to trade in the late afternoon, according to a market source.

Early in the session, a trader quoted the issue at $24.65 bid, $24.70 offered. After the bell, a source said he was seeing a $24.65 bid for the preferreds.

Joint bookrunners were Morgan Stanley & Co. LLC, UBS Securities LLC, Barclays, Stifel Nicolaus & Co., Credit Suisse Securities (USA) LLC and MLV & Co. LLC.

JPMorgan Chase & Co. meantime launched a $1,000-par fixed-to-floating rate deal, with price talk between 6.125% and 6.25%.

The deal priced, with $1 billion of the preferreds being sold at par to yield 6.125%. On April 30, 2024, the issue begins to float at Libor plus 333 bps.

J.P. Morgan Securities LLC was the bookrunner.

A trader also opined that the preferred space could see decent deal flow in the coming months.

"Preferreds have tightened dramatically since the beginning of the year," he said. That makes for a good environment to raise capital in, he added.

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