Digital Realty frees, trades lower; recent issues remain in focus; Fannie Mae dips

By Stephanie N. Rotondo

Seattle, Aug. 3 – There continued to be a new deal focus in the preferred stock market on Thursday.

Digital Realty Trust Inc.’s $200 million offering of 5.25% series J cumulative redeemable preferreds – a deal priced late Wednesday – freed to trade in the early hours of the session.

The paper was assigned a temporary trading symbol, “DGGTP.”

One market source saw the issue ending at $24.69.

“Ouch for those par buyers,” he said. “Another max yield to underwriter calculation.”

Nearly 5.52 million of the preferreds were exchanged during the day.

The deal came tighter than the 5.375% price talk and upsized from $100 million.

BofA Merrill Lynch, Citigroup Global Markets Inc. and Wells Fargo Securities LLC ran the books.

From Tuesday’s business, Eagle Point Credit Co. Inc.’s $27.5 million of 6.75% $25-par notes due 2027 were pegged at $25.125 at day’s end.

However, a source noted that the volume weighted average price was $25.025.

The issue freed to trade during the midweek session. Like Digital Realty, pricing was tighter than the 6.875% talk, while the size was upped from $25 million.

Ladenburg Thalmann & Co. Inc. was the bookrunner.

And, Public Storage’s $300 million of 5.05% series G cumulative preferreds – a deal priced Monday – continued to hold steady at $24.75, on almost 902,000 shares traded.

The issue freed to trade on Tuesday and is trading under a temporary ticker symbol, “PBSTP.”

As for deals from the previous week, Annaly Capital Management Inc.’s $700 million of 6.95% series F fixed-to-floating rate cumulative redeemable preferred stock (NYSE: NLYPrF) continued to be active.

The preferreds firmed 8 cents to end at $24.91, on almost 966,000 shares exchanged.

Fannie loses ground

Away from new and recent deals, Fannie Mae’s preferreds were in play on Thursday following the release of the agency’s latest quarterly results.

And while the bottom line beat year-ago figures, the preferreds were losing ground.

The 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were down a dime, or 1.45%, at $6.80.

About 1.59 million of the preferreds changed hands.

The 8.25% series T noncumulative preferreds (OTCBB: FNMAT) dipped 2 cents to $6.67, though on only about 321,100 shares traded.

As for sector peer Freddie Mac, its 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) declined a nickel to $6.55.

Just over 210,000 of those preferreds were trading.

For the second quarter, Fannie posted net income of $3.2 billion. That compared to income of $2.9 billion for the same quarter of 2016 and $2.8 billion for the first quarter of 2017.

However, net revenues declined to $5.4 billion from $5.5 billion the previous year. In the previous quarter, revenue was $5.6 billion.

If the Federal Housing Finance Agency should require it, Fannie intends to make a $3.1 billion dividend payment to the U.S. Treasury. Prior to that payment, Fannie has paid back $162.7 billion to the government following its September 2008 bailout.

Sector peer Freddie Mac announced its results earlier in the week. A change in the language regarding the dividend had the market wondering if the FHFA was planning to let the GSEs start to rebuild their capital cushion.

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