Preferreds gyrate with oil, equities; W.R. Berkley issue not yet free; eBay notes steady

By Stephanie N. Rotondo

Seattle, Feb. 24 – The preferred stock market finished a touch firmer on the day after starting out Wednesday with a weaker tone.

A trader said there was not necessarily any “rhyme or reason to it.”

“There is just a strong disconnect,” the trader commented.

Still, with oil prices initially on the decline – they ended firm for the day on new data that showed U.S. demand for gas was up year over year – that seemed to be playing at least a small role in the day’s movements.

“Oil is off a buck and that seems to wreck havoc on the banks,” a trader said early in the session. “People don’t think the banks are telling the truth about their exposure” to the struggling sector.

The Wells Fargo Hybrid and Preferred Securities index ended up 10 basis points. The index was down 41 bps at mid-morning.

The early weakness weighed on recently priced deals, such as W.R. Berkley Corp.’s $100 million of 5.9% $25-par subordinated debentures due 2056.

A trader saw the issue around $24.60 in early trading, adding that the paper had not yet freed to trade.

Another trader said the paper had “inched up a hair” by the bell, seeing a $24.60 bid, $24.62 offered market.

“It’s probably the manager,” the trader said.

The deal still had not freed by the afternoon, the trader added.

“It doesn’t look like it went very well,” the trader said. “It might be taking a little extra time to clean up the mess.”

“It will probably free tomorrow morning,” he opined.

The new issue priced on Tuesday, coming downsized from $150 million and in line with price talk.

eBay Inc.’s $750 million offering of 6% $25-par notes due Feb. 1, 2056 were then pegged at $24.78 bid, $24.82 offered.

Another source said the notes were trading “right around” $24.80.

That issue came Monday and freed to trade on Tuesday.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC were the bookrunners on both deals.

Looking ahead, “we may see some more deals,” a trader said. While he had not yet heard of any specific deals in the works, he said that it “seems like these last couple were received very well.”

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