Preferreds soft; Wells Fargo's deal frees from syndicate; AmTrust, Maiden take a beating

By Stephanie N. Rotondo

Phoenix, Dec. 12 - Preferred stocks continued to sell off on Thursday as investors swapped out their shares for new issues, a trader said.

The Wells Fargo Hybrid and Preferred Securities index was down 27 basis points around midday but dropped all the way to down 61 bps by the end of business.

Wells Fargo & Co.'s $750 million offering of 6.625% series R class A fixed-to-floating rate noncumulative perpetual preferred stock freed to trade early in the session, according to a trader. The deal priced Wednesday.

The trader saw the issue trading in a par to $25.05 context.

The trader also noted that the Wells Fargo deal had been assigned a Bloomberg reporting symbol, "WEFAL."

"It should do well," another trader said of the issue, seeing paper trading around par.

The dividend on the new deal will be fixed through March 15, 2024, at which time it will float at Libor plus 369 bps.

Among other recently priced deals, Morgan Stanley & Co. Inc.'s $850 million of 6.875% series F fixed-to-floating rate noncumulative preferreds were hanging around $24.95 early in the session but dipped to $24.85 by the end of the day.

The new issue is expected to list on the New York Stock Exchange on Friday under the ticker symbol "MSPF."

Fifth Third Bancorp's $450 million of 6.625% series I fixed-to-floating rate noncumulative preferreds were meantime offered at $24.80.

Both of those issues came last week.

GeoInvesting stabs at AmTrust

AmTrust Financial Services Inc.'s 6.75% series A noncumulative preferreds (NYSE: AFSIPA) took a beating as a research group alleged the company was hiding losses overseas.

The paper ended the day down $2.66, or 12.65%, at $18.36. The straight equity (Nasdaq: AFSI) meantime lost $4.63, or 12.09%, to close at $33.67.

Maiden Holdings Ltd.'s 8.25% series A noncumulative preference shares were also getting taken down in the wake of the story, given that AmTrust and Maiden work together via a quota share reinsurance agreement.

The Maiden issue (NYSE: MHPA) declined $1.67, or 6.61%, to $23.60. The 7.75% $25-par notes due 2043 (NYSE: MHNC) - a $152.5 million issue that priced Nov. 18 - fell $2.66, or 11.49%, to $20.50.

GeoInvesting, an online provider of research, issued a report Thursday that alleged AmTrust was using discrepancies in U.S. and Luxembourg accounting practices to avoid disclosing certain losses to the Securities and Exchange Commission. The website also claimed the company was tinkering with valuations on life-settlement contracts.

New York-based AmTrust, however, issued a statement denying the claims.

"We believe that recent negative articles that individuals have distributed are false and misleading and are being distributed with the intention of manipulating the shares of AmTrust in order to benefit those who own short position in our shares," said Barry Zyskind, president and chief executive officer, in the statement.

The statement went on to say that the company has "addressed issues in its quarterly earnings calls and public filings that have been raised regarding its investment in life settlements, clarifying the accounting of the life settlement portfolio.

"In addition, over the past several years, the company, with the approval of the Luxembourg insurance authorities, has acquired a number of Luxembourg reinsurance companies at a discount to their asset value from multinational companies. The company consolidates the results of all of its insurance subsidiaries, including the results of the Luxembourg reinsurance companies."

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