SCE issue frees to trade; new issues popular with investors; financials take hit in trading

By Andrea Heisinger

New York, May 14 - The preferred stock market was "horribly quiet" on Monday. No new dollar deals were announced or priced, and there was little in the way of trading.

The new 5.625% series F perpetual trust preference securities from Southern California Edison Co. unit SCE Trust I sold last week were freed to trade in the secondary after being seen in the gray market for two days.

One trader remarked in the early afternoon that trading was "so quiet" and volume was low.

Later, after the market close, a source said, "It was not a pretty day in our market."

Continuing news of fallout, credit rating downgrades and resignations stemming from the $2 billion trading loss by JPMorgan Chase & Co.'s unit out of London had little to no noticeable effect on the banking giant's preferred stock, the trader said.

"It's a blip for them," he said. "They make enough money no one's really worried."

The main fear is that the trading loss will relight the fire that led to regulations on the financial industry like the Dodd-Frank Wall Street Reform and Consumer Protection Act, the trader said.

There was a quick fall in the morning on concerns about Europe, a source said. By about 11:30 a.m. ET, the market fell to its low point of being down about 63 basis points, he said.

"It popped up a little, about 15 cents on the morning," the source said, but seesawed back and forth and ended down about 56 bps on the day, or 14 cents on average.

SoCal's seen most active

SCE Trust's $475 million of cumulative trust preferreds (NYSE: SCEPRF) sold on Thursday were freed to trade on Monday and seen in early afternoon at $24.80 offered, a source said.

By the market close, there was a bid of between $24.70 and $24.75 on the trust preferreds.

The trust preferreds were priced at par of $25.00 liquidation amount, and proceeds are going to be used to repay commercial paper borrowings and/or for general corporate purposes.

The new trust preferreds were also atop the day's most-traded list, seen flat at $24.70 with about 2.3 million shares changing hands, a trader said.

New issues take over trading

While outstanding deals from the Royal Bank of Scotland Group plc and Ally Financial Inc. have dominated the preferred stock secondary market in recent weeks, there was a shift on Monday to a focus more on new issues, traders said.

PNC Financial Services Group, Inc.'s recent 6.125% series P preferreds followed SoCal Edison's new trust preferreds on the most-traded list. Investors traded 1.67 million of the PNC preferreds, and they were up 7 cents on the day, ending at $25.10.

Annaly Capital Management Inc.'s recent 7.625% series C preferreds had 844,000 shares trade, and they ended up 4 cents on the day at $24.80.

Among non-new issues popular with investors, U.S. Bank saw 801,000 of its series N preferreds trade. They ended down 20 cents on the day at $25.67.

Ally Financial's series B preferreds, which have been active lately on news of the company's Residential Capital LLC subsidiary, were seen up 2 cents on the day at $22.89, and 489,000 of the preferreds traded. They had been quoted at $22.87 on Friday.

The U.S. Department of the Treasury confirmed earlier last week that it gave Ally the OK to put the troubled Residential Capital unit into bankruptcy, should that be the path taken. On Monday, ResCap announced it had filed for Chapter 11 bankruptcy protection.

Financials take a hit

Preferreds from financial names, especially those from Europe, were seen worse in trading on Monday on news about JPMorgan combined with the European Union taking another look at the bailout terms of ING Groep NV.

"It's interesting. Some financials are down less than others," a trader said.

Citigroup Inc.'s series H preferreds were down about 3% on the day, the trader said, while ING issues were "down a lot. IDG is off 50 cents, down 2%."

European banks were hit the hardest, ending the day down 1% to 2% collectively.

© 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.