Morning Commentary: Fannie, Freddie mixed, then match in trading; Huntington, Hercules climb

By Christine Van Dusen

Atlanta, May 5 – Preferred stock from Fannie Mae and Freddie Mac put in a mixed performance on Thursday morning after Fannie posted stronger earnings and Freddie released weaker results.

“We've seen a mixed sell-off in those issues,” a trader said.

By late-morning, though, both names were down 4 cents in trading, with Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) spotted at $3.70 on Thursday morning, following Wednesday’s $3.74. Fannie’s 8.25% series S fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FNMAS) were seen at $3.80 on Thursday. At the end of Wednesday’s session the stock moved up to $3.84.

For the quarter, Fannie reported net income of $1.1 billion while Freddie reported a net loss of $354 million, compared to a profit of $524 million the year before.

In other trading, the new issue from IberiaBank Corp. – $50 million 6.6% series C fixed-to-floating rate noncumulative perpetual preferred stock via Keefe, Bruyette & Woods and BofA Merrill Lynch – received some attention.

“That’s been trading between $25.20 and $25.30,” the trader said.

The bank’s 6.625% series B fixed-to-floating rate noncumulative perpetual preferreds (Nasdaq: IBKCP) traded Thursday morning at $25.57. On Wednesday the notes closed at $25.55.

The new issue of preferreds from Huntington Bancshares Inc. – an additional $200 million of its 6.25% series D noncumulative perpetual preferred stock (Nasdaq: HBANO) – traded Thursday morning at $26.11 after closing Wednesday at $26.01, up 6 cents.

The Columbus, Ohio-based bank announced the offering late Monday. Huntington initially sold $350 million of the preferreds on March 14. Another $50 million of a $52.5 million greenshoe was exercised, lifting total issuance to $400 million.

Wells Fargo Securities LLC ran the books on the add-on deal. BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and the Huntington Investment Co. were joint lead managers.

Hercules preferreds rise

Hercules Capital Inc. saw its $65.4 million add-on to its 6.25% $25-par notes due 2024 (NYSE: HTGX) trade Thursday at $25.04 after trading Wednesday at $24.97.

Prior to the add-on, there was $103 million of the notes outstanding. Including the add-on and the exercised over-allotment option, the total outstanding amount is $175.9 million.

Hercules – formerly Hercules Technology Growth Capital Inc. – is a Palo Alto, Calif.-based specialty finance company.

“We’re still waiting to see more new issues,” the trader said.

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