Preferreds improve; National General brings upsized new issue; Gabelli frees to trade

By Stephanie N. Rotondo

Seattle, June 29 – The preferred stock market continued to trade firmly on Wednesday, though the gains were modest compared to the previous day’s session.

The Wells Fargo Hybrid and Preferred Securities index finished 13 basis points higher. The index was up 16 bps at mid-morning. It closed up 93 bps on Tuesday.

The positive tone of the market was helping the primary, as National General Holdings Corp. added a deal to the calendar. The New York-based insurance company said it was selling a minimum of $50 million of series C noncumulative preferreds, with price talk at 7.625%.

The deal came upsized at $175 million and priced at par to yield 7.5%.

Morgan Stanley & Co. LLC, UBS Securities LLC and Keefe Bruyette & Woods Inc. are running the books.

Proceeds will be used for general corporate purposes.

In the wake of the announcement, the company’s 7.5% series B noncumulative preferreds (Nasdaq: NGHCO) were trading off 74 cents, or 2.83%, at $25.42. The 7.625% $25-par subordinated notes due 2055 (Nasdaq: NGHCZ) were initially down 9 cents at $25.15 but closed 3 cents better at $25.27.

Meanwhile, Gabelli Dividend & Income Trust’s $100 million of 5.25% series G cumulative preferreds – a deal priced Tuesday – had freed to trade as of mid-morning, according to market sources.

One trader pegged the issue at par bid, $25.25 offered. Another saw the paper at $25.05 bid, $25.20 offered.

Morgan Stanley and Wells Fargo Securities LLC were the joint bookrunners. G. research LLC was the co-manager.

Proceeds will be used to purchase portfolio securities in accordance with the fund’s investment objective and policies.

Gabelli is a Rye, N.Y.-based investment firm.

Banks up ahead of CCARs

U.S. banks were on the rise in midweek trading ahead of the Federal Reserve’s release of the latest CCAR results.

The results were posted at 4:30 p.m. ET.

Wells Fargo & Co.’s 5.5% series X class A noncumulative preferreds (NYSE: WFCPX) traded up 15 cents to $25.90. The preferreds were highly active, with over 1.7 million shares trading.

Bank of America Corp.’s 6% series EE noncumulative preferreds (NYSE: BACPA) were also busy, trading up 23 cents to $25.81.

JPMorgan Chase & Co.’s 6.15% series BB noncumulative preferreds (NYSE: JPMPH) meantime rose a nickel to $26.73.

Last week, the Fed said all 33 banks that it tested had passed its stress review. The first round looks at a firm’s capital reserves and how the firm would fare in the wake of another financial crisis.

Wednesday saw the release of the second round results, which take into account a bank’s capital plan. Those results saw three institutions getting flagged: Deutsche Bank Trust, Santander Holdings USA and Morgan Stanley.

The Fed is requiring Deutsche and Santander to re-submit their capital plans. Morgan Stanley must also re-submit its plan by the fourth quarter in order to “address weakness in its capital planning processes.”

However, the central bank did not object outright to Morgan Stanley’s plan.

After the results came out, BofA said it was boosting its common stock dividend by 50% and that it would buy up to $5 billion of its stock back. JPMorgan said it would repurchase up to $10.6 billion of equity, though it was holding its dividend steady.

Citigroup Inc. said it would increase its dividend to 16 cents per share, over triple the nickel paid out in the first quarter.

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