Preferred stock market better as broader markets drift down; Arch Capital frees to trade

By Stephanie N. Rotondo

Seattle, Sept. 23 – The preferred stock market was holding its ground on Friday as the rest of the market was coming in.

Markets had run up earlier in the week, first on expectations the Federal Reserve would hold interest rates steady and then when that expectation proved true.

For the week’s new issues, Arch Capital Group Ltd.’s $450 million of 5.25% series E noncumulative preferreds – a deal priced Thursday – freed in the second half a of the day.

A market source saw the issue finishing at $24.92. That compared to earlier quotes at $24.87 bid, $24.90 offered.

The deal came via BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Wells Fargo Securities LLC, J.P. Morgan Securities LLC and RBC Capital Markets. It was upsized from $250 million and at the tight end of the 5.25% to 5.375% price talk.

Meanwhile, AmTrust Financial Services Inc.’s $287.5 million of 6.95% series F noncumulative preferreds were pegged at par bid, $25.12 offered at mid-morning. Paper closed at $25.10, a gain of a penny day over day.

That issue priced Tuesday, with $250 million of the preferreds being sold. On Thursday, the deal’s $37.5 million greenshoe was fully exercised, a market source reported.

From Monday’s business, Gladstone Investment Corp.’s $50 million of 6.25% series D cumulative term preferred stock was seen at $25.13 bid, with no offers.

However, the issue ultimately rose 6 cents to end at $25.25.

The McLean, Va.-based real estate investment trust said Friday that its $7.5 million greenshoe had been fully exercised, bringing the total amount outstanding to $57.5 million.

But while the preferred space was marginally higher – the Wells Fargo Hybrid and Preferred Securities index was up 5 basis points – a trader noted that volume was starting to dwindle.

Still, Southern Co.’s $800 million of 5.25% $25-par series 2016A junior subordinated notes due 2076 (NYSE: SOJB) remained the dominating security, with well over 700,000 notes trading.

The issue ended the day at $25.14, up 6 cents.

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