Preferred space seeing 'massive outflows'; Zions launches redemption of series Cs, shares higher

By Stephanie N. Rotondo

Phoenix, Aug. 16 - A preferred stock trader said the market was "continuing to trickle down" on Friday even as the straight equities attempted to rebound.

"There are a lot of stories on the newswires about the massive outflows from different preferred funds," he said. Part of those outflows was likely due to all of the redemptions that have occurred, but some of it was due to concerns about interest rates and yields in relation to other credit structures, like municipal bonds.

Based on how spreads had widened compared to Treasuries, he said, the market was "oversold."

But the selling continued regardless, eventually closing down about 70 basis points, according to the Wells Fargo Hybrid and Preferred Securities index.

"Volume was very light other than two or three names," a market source added.

Late Thursday, Zions Bancorporation officially announced the redemption of its 9.5% series C noncumulative perpetual preferreds.

The paper (NYSE: ZBPC) was trading up a penny at $25.58.

The company originally said on July 24 it was planning to redeem $590 million of the preferreds. However, the official announcement stated that the redemption was for the entire $799.5 million outstanding.

The call date is Sept. 15. The call price is par plus 60.6944 cents in accrued dividends.

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