CoBank trades north of par; Torchmark lists; State Street rises; Ally to retire series A

By Stephanie N. Rotondo

Seattle, April 6 – The preferred stock market was edging higher in midweek trading.

The Wells Fargo Hybrid and Preferred Securities index finished 13 basis points higher.

The gains came as the market digested the minutes from the latest Federal Reserve policy meeting in March, in which it was decided to be cautious about future interest rate hikes. The minutes indicate that several members of the central bank argued against a rate increase in April.

However, that has caused anticipation of a hike in June to increase.

The primary space had another new deal churning about, after CoBank ACB priced a $375 million offering of 6.25% $1,000-par fixed-to-floating rate perpetual preferreds late Tuesday.

Toward the close, a trader quoted the new deal – which had freed to trade – at 100.875 bid, 101 offered. That compared to earlier quotes of 100.5 bid, 101 offered.

Initial price talk was 6.5% to 6.625% but was later revised to 6.25% to 6.375%. The deal was also upsized from $300 million.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC ran the books.

The dividend is fixed until Oct. 1, 2026, at which point it will float at Libor plus 466 bps.

The Denver-based national cooperative bank will use proceeds to increase regulatory capital, pursuant to Farm Credit Administration regulations. Funds could also be used for general corporate purposes.

Among recently priced deals, Torchmark Corp.’s $300 million of 6.125% $25-par junior subordinated debentures due June 15, 2056 hit the New York Stock Exchange, trading under the ticker “TMKPC.”

The deal priced March 29, coming upsized from $150 million.

A trader quoted the issue at $25.06 bid, $25.08 offered. The notes ended at $25.10, up from $25.02 at the open.

State Street Corp.’s $500 million of 5.35% series G fixed-to-floating rate noncumulative preferreds were meantime pegged at $25.55 bid, $25.60 offered early in the day. But the paper moved up even more, closing at $25.65, a gain of 3 cents.

That issue priced Monday and freed on Tuesday. It is trading under a temporary symbol, “SSTTP.”

Ally plans redemption

Ally Financial Inc. announced plans for a senior notes offering on Tuesday, the proceeds of which will be used to retire the remaining 8.5% series A fixed-to-floating rate perpetual preferred stock (NYSE: ALLYPB).

The preferreds were initially up a penny on the news, trading at $25.50. However, they closed at $25.49, unchanged.

As for the 8.125% series 2 fixed-to-floating rate trust preferred securities (NYSE: ALLYPA), they dominated the trading day, with about 752,000 shares being exchanged. The preferreds ended up 4 cents at $24.19.

The former financing arm of General Motors Co. already redeemed $325 million of the preferreds on May 20, 2015. The redemption price at that time, including accrued dividends, was $26.65.

Oil names rally

As domestic crude oil prices jumped over 5% for the day, preferred units of MLPs were gaining ground.

In fact, Legacy Reserves LP and Breitburn Energy Partners LP had some of the largest percentage gains on the day.

Legacy’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) added 28 cents, or 13.21%, to close at $2.40. The 8% series A fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYP) improved 23 cents, or 9.96%, to $2.54.

Breitburn’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) meantime put on 22 cents, or 3.93%, to end at $5.82.

For its part, oil prices surged after the U.S. Energy Information Administration reported that crude inventories fell by 4.9 million barrels last week.

Analysts polled by Reuters had expected a build of 3.2 million barrels.

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