Preferred stock market sluggish; primary experiences 'indigestion'; RBS issues bleed out

By Stephanie N. Rotondo

Phoenix, Feb. 4 - The preferred stock market was getting off to a slow start Monday as people were still getting over their "Super Bowl hangovers," a trader quipped.

"I thought we'd see a deal or two, but nothing is coming out," the trader added. However, he said perhaps the deals would start to flow come Tuesday, noting that he expected Wells Fargo & Co. to bring a new deal soon, given a recently announced redemption.

"Everybody's expecting issuance in the [near] future to be high," another market source said. But a busy January combined with an active calendar throughout 2012 has resulted in "indigestion" - that is, too much supply and not enough demand. Given such, recent new issues have not been performing as well as they might have in a less active environment.

For example, J.P. Morgan & Chase Co.'s $850 million of 5.45% series P noncumulative perpetual preferreds - a deal that came Jan. 29 - remains under par, trading down a penny on Monday to $24.85.

In other recent issues, Southern California Edison Co.'s SCE Trust II-linked 5.1% trust preference shares - a $400 million issue that priced Jan. 23 - listed on the New York Stock Exchange Monday under the symbol "SCEPG." A trader said the securities "opened surprisingly flat," quoting them at $24.50 bid, $24.57 offered.

The issue was trading at $24.57 at midday, down 11 cents from the previous close. By the end of business, the issue was at $24.60, down 8 cents.

Also listed were PennantPark Investment Corp.'s 6.25% $25-par senior notes due 2025. That $67.5 million issue came Jan. 16.

The notes listed under the symbol "PNTA." Paper was trading at $24.70, down from opening levels of $24.75.

Meanwhile, Royal Bank of Scotland Group plc's preferreds continued to bleed, as investors ponder the latest banking scandal in the United Kingdom - this one to do with interest rate swaps missold to small businesses.

The 5.9% noncumulative guaranteed trust preferreds (NYSE: RBSPE) "got hammered," a source said, falling 15 cents to $21.35.

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