Preferred outflows might be stemmed for now, trader says; Gulf Power frees; RBS shares up

By Stephanie N. Rotondo

Phoenix, June 13 - A preferred stock trader speculated that "the bleeding has stopped," at least for now.

A recent sell-off could be dying down, he said, adding "that's why you're seeing a bit of a bounce."

He noted that the iShares S&P US Preferred Stock index (PFF) had seen major outflows over the last week and a half.

But even as the market was believed to be stabilizing for the time being, activity remained subdued across the primary and secondary arenas.

"They priced two new deals [on Wednesday]," a trader said, referring to Gulf Power Co.'s $50 million of $100-par series 2013A noncumulative perpetual preferreds and Vanguard Natural Resources LLC's $55 million of 7.875% series A cumulative redeemable preferred units. "But I'm not seeing any follow-through markets."

Later in the day, the trader saw Gulf Power's preferreds at 99.5 bid after the issue freed up.

Vanguard was meantime pegged around $24.62.

Other recent deals, like Apollo Investment Corp.'s $135 million of 6.875% $25-par senior notes due 2043 and Allstate Corp.'s $250 million of 5.625% series A noncumulative preferreds, were holding in there.

A trader saw the Apollo paper at $24.60 bid and the Allstate issue at $24.70 bid.

The secondary was recovering some following the last week's dip. Even Royal Bank of Scotland Group plc paper was faring better, despite news out on Wednesday regarding the departure of the bank's chief executive officer.

RBS recovers

Royal Bank of Scotland Group preferreds were recouping some of the ground lost in the previous session on news CEO Stephen Hester was leaving his post by the end of the year.

The 5.9% noncumulative guaranteed trust preferred securities (NYSE: RBSPE) gained 65 cents, or 3.14%, to close at $21.33, as the 6.08% noncumulative guaranteed trust preferred securities (NYSE: RBSPG) put on 54 cents, or 2.55%, ending at $21.69.

The 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) earned 75 cents, or 3.15%, to $24.55.

In the bond, a trader saw the 6.1% notes due 2023 finish "virtually unchanged" at 98 5/8.

Hester intends to leave the Edinburgh, Scotland-based company by December. RBS chairman sir Philip Hampton told reporters at a press conference the U.K. Treasury played a significant role in making the decision, as it was urging RBS to push up its timeline to return to the private sector.

RBS is 81% owned by the U.K. government.

In announcing the CEO's plan to exit, RBS also said it was cutting up to 2,000 jobs over the next 18 months. Once the cuts are completed, the bank will have dropped 41,000 employees since 2008.

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