Fannie, Freddie rise as hedge funds seek privatization; Oxford Lane Capital brings add-on

By Stephanie N. Rotondo

Phoenix, Nov. 13 - Though the preferred stock market was trending lower on Wednesday, a trader said Fannie Mae and Freddie Mac paper had "jumped" in trading.

The upward move was attributed to a news article that claimed private equity investors and hedge funds invested in the agencies were proposing to convert their $34.6 billion of preferreds and to underwrite a $17.3 billion rights offering in order to take the firms private.

Meanwhile, Oxford Lane Capital Corp. priced another $40.63 million of its 7.5% series 2023 term preferreds early in the session.

The add-on deal was announced Tuesday. The company sold $20 million of the paper on June 30.

The Wells Fargo Hybrid and Preferred Securities index traded off 7 basis points on the day.

Fannie, Freddie gain

Freddie and Fannie preferreds popped in midweek trading on the back of a news article that claimed private investors were putting together a proposal to take the agencies private.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) closed up 76 cents, or 9.44%, to $8.81. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) ended 83 cents, or 10.35%, higher at $8.85.

According to the article, private equity investors and hedge funds invested in the agencies want to convert their $34.6 billion of preferreds and to underwrite a $17.3 billion rights offering in order to take the firms private.

But one market source said he was not so sure how good a deal that would be.

"I don't know why anybody would think that is a good deal for the Treasury and for taxpayers," he said.

"There were a lot of details missing from that article," the source added. Without more details, he said, it was difficult to assess on its own merit.

The source further remarked that there are currently about four proposals on the table for how to move forward with the agencies that went under the U.S. government's conservatorship in 2008. Of those plans, three of them liquidate or wind-down the agencies.

With Congress unable to make up its mind how to proceed with Fannie and Freddie - both of which have either completely repaid or are this close to repaying the bailout funds they received - the source opined that "volatility will remain" in the agencies' preferreds.

Oxford prices add-on

Oxford Lane Capital sold another $40.63 million of its 7.5% series 2023 term preferreds (Nasdaq: OXLCO), according to a press release published early Wednesday.

That will bring the total outstanding amount to $60.63 million.

The additional preferreds were sold at $22.50 per share, which was a slight discount to Tuesday's closing share price of $22.51. Post-pricing, the preferreds came under pressure, falling a quarter, or 1.11%, to $22.26 by midday.

At the close, the issue was off 6 cents at $22.45.

Ladenburg Thalmann & Co. Inc., Barclays and Deutsche Bank Securities Inc. were the joint bookrunners.

Proceeds will be used for investments and general working capital purposes.

Oxford Capital is a Greenwich, Conn.-based closed-end, externally managed non-diversified investment company.

Financials busy

Financials were dominating the day's most actively traded list, at least among paying securities.

Morgan Stanley & Co. Inc.'s 7.125% series E fixed-to-floating rate noncumulative preferreds (NYSE: MSPE) fell 4 cents to $25.86, while HSBC Holdings plc's floating-rate series F noncumulative preferreds (NYSE: HBAPF) dropped 17 cents to $19.30.

Two Citigroup Inc. issues made the list, though both finished the session flat.

The 6.875% series K fixed-to-floating rate noncumulative preferreds (NYSE: CPK) ended at $24.88, and the 7.875% fixed-to-floating rate trust preferreds (NYSE: CPN) closed at $27.26.

And, Goldman Sachs & Co.'s 5.5% series J fixed-to-floating rate noncumulative preferreds (NYSE: GSPJ) fell 2 cents to $24.41.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.