Preferreds firm to start week; calendar buzz continues; Capitala steady as new deal launched

By Stephanie N. Rotondo

Seattle, May 22 – The preferred stock market opened the week with a firm tone although overall trading volume remained thin.

“There’s nothing too exciting going on news-wise or market-wise,” a market source said.

The source further noted that preferreds “did dramatically better than Treasuries.”

The Wells Fargo Hybrid and Preferred Securities Index improved 18 basis points. The U.S. iShares Preferred Stock ETF was up 36 bps.

As for the new issue calendar, a trader said he was hearing a small business development company could hit the books on Tuesday, while another mid-size deal was slated for Wednesday.

He added that he did not know which sector the midweek deal was coming from.

“There are rumors of new issues, just nothing ever comes,” lamented another source. However, he said talk of a BDC deal was “in line” with the rumblings he heard.

In secondary trading, Capital One Financial Corp.’s 5.2% series G noncumulative preferreds (NYSE: COFPrG) were up a nickel at $23.98. Qwest Corp.’s 6.75% $25-par notes due 2057 (NYSE: CTDD) were also better, adding 4 cents to close at $25.08.

Morgan Stanley & Co. Inc.’s 5.85% series K fixed-to-floating rate noncumulative preferreds (NYSE: MSPrK) also made the day’s gainers list, rising 6 cents to $26.59.

A source remarked that it was unusual to find People’s United Financial Inc.’s 5.625% series A fixed-to-floating rate noncumulative preferreds (Nasdaq: PBCTP) among the day’s most active issues.

“But there’s an unusual mix because the [volume] threshold is so low,” he pointed out.

Those preferreds bucked the day’s upward trend, falling a dime to $27.85.

Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) also finished lower on the day, losing 30 cents, or 4.69%, to end at $6.09.

Meanwhile, Capitala Finance Corp.’s $70 million of 6% $25-par notes due 2022 were seen holding around par bid, $25.15 offered, according to a trader.

The notes will list on the Nasdaq Global Select Market on Tuesday under the ticker symbol “CPTAL.”

The deal priced on May 10, coming upsized from $50 million.

A trader noted that the Charlotte, N.C.-based business development company announced a $50 million sale of $25-par unsecured convertible notes due 2022 on Monday. Proceeds from the convertibles offering, as well as those from the earlier baby bond deal, will be used to redeem all of the outstanding 7.125% notes due 2021.

“It makes no sense,” the trader said of the new issue. “They should have just done a larger baby bond deal and saved themselves a lot of money.”

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