Government Properties set to free; American Homes gets temporary symbol; agencies improve

By Stephanie N. Rotondo

Seattle, May 20 – Recently priced preferred stock issues remained in focus in Friday trading.

Though no new issues were announced during the session, a trader said that “people are saying [the deal flow] is just going to keep going.”

From Thursday’s business, Government Properties Income Trust’s $300 million of 5.875% $25-par senior unsecured notes due 2046 were expected to free at some point Friday.

He pegged the issue at $24.75 bid, $24.85 offered at mid-morning.

W.R. Berkley Corp.’s $290 million of 5.75% $25-par subordinated debentures due 2056 – a deal priced Wednesday – were meantime seen in a $24.93 to $24.97 context.

Also from Wednesday’s business, LaSalle Hotel Properties’ $150 million of 6.3% series J cumulative preferreds were offered at $25.05.

And, American Homes 4 Rent’s $225 million of 6.5% series D cumulative redeemable preferreds were placed at par bid, $25.14 offered early in the day.

The preferreds closed at $25.13, up 3 cents.

The issue, which came early Tuesday after being announced Monday, is trading under the temporary ticker symbol “AMHHP.”

Overall, the preferred market was attempting to regain some of the territory lost in the last couple of days over concerns about a possible interest rate hike in June or July.

Still, the day’s early gains were modest, as the Wells Fargo Hybrid and Preferred Securities index ticked up just 5 basis points. However, the index ultimately finished 29 bps better.

Fannie, Freddie push higher

While recently priced deals did get their fair share of attention, trading in Fannie Mae and Freddie Mac clearly dominated the session.

The GSEs’ preferreds were on the rise during the day, as more court documents in a case challenging the government’s “net worth sweep” of the agencies’ profits were unsealed.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up 27 cents, or 7.05%, at $4.10, with over 3 million shares trading. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were also better by 27 cents, or 7.22%, at $4.01.

Over 1.6 million of those preferreds were exchanged.

The documents appeared to show that the White House was more involved with the Treasury Department’s August 2012 decision to take the bulk of the profits earned by Fannie and Freddie while they operated under conservatorship than previously stated. One e-mail, written by a top housing official in the Obama Administration, went so far as to say that the alteration in the 2008 conservatorship plan would ensure that the mortgage giants would not be able to “repay their debt and escape as it were,” according to a report published by The New York Times.

The e-mail allegedly came not long after a meeting in July 2012 with the Federal Housing Finance Agency, the regulator overseeing the two agencies. In that meeting, the regulator reportedly told officials that Fannie and Freddie were about to enter the “golden years” in terms of profits.

Stakeholders of Fannie and Freddie have taken the government to court challenging the sweep, deeming it illegal under the conservatorship. They have also argued that the government has set up Fannie and Freddie to fail again, as they are not able to build up any capital cushion in the event of another financial crisis.

To date, Fannie and Freddie have paid back over $50 billion more than the combined $187.5 billion bailout received in the financial crisis. However, the principal amount of what it owes remains outstanding, as all of those payments have been deemed dividend payments on the Treasury’s holdings.

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