Preferred stocks finish firm; Escalera falls as company halts dividend; banks improve

By Stephanie N. Rotondo

Phoenix, March 10 – Preferred stocks were ticking up Tuesday as long Treasuries improved due to a strong dollar, according to a trader.

The Wells Fargo Hybrid and Preferred Securities index ended up 25 basis points. The index was up 10 bps at mid-morning.

However, while a market source said that it was “a better day than yesterday” in terms of price moves, “volume was pretty feeble.”

A trader also noted that oil was weakening. That, combined with news that Escalera Resources Co. had suspended its dividend, was pressuring other oil names.

Escalera’s 9.25% series A cumulative preferreds (Nasdaq: ESCRP) closed down $9.47, or 53.59%, at $8.20.

That was up from the intraday low of $8.01.

“People are selling off other issues in fear” they may follow suit, the trader said.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were off $1.28, or 5.77%, at $20.90. Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) dipped $1.17, or 5.1%, to $21.78.

Escalera said it was halting the dividend in order to preserve its cash. If the company fails to pay the dividend for six consecutive or non-consecutive periods, the dividend rate goes up to 12% until the accumulated dividends are paid in full.

For its part, West Texas Intermediate crude dropped $1.36, or 2.72%, to $48.64 a barrel. Brent crude weakened $1.96, or 3.35%, to $56.57.

The stronger dollar was blamed for the decline in oil prices.

The primary space was meantime still quiet as of early trading, though a trader said he was “hearing of a possible deal today, but I’m not seeing it yet.”

With the Federal Reserve set to release its Comprehensive Capital Analysis and Review results at 4:30 p.m. ET on Wednesday, another market source said he “expects that will kick off a couple-week wave of issuance.”

Banks up ahead of CCAR

As the market prepared for the CCAR results, U.S. bank preferreds were on the rebound.

JPMorgan Chase & Co.’s 6.125% series Y noncumulative preferreds (NYSE: JPMPF) inched up 6 cents to $24.98, while the 6.7% series CC capital securities (NYSE: JPMPC) ended up a penny at $25.41.

The New York-based bank said Feb. 27 that it was redeeming all $1.5 billion of the 6.7% shares on April 2. A market source said the day’s activity in the two issues – which were the most active among paying securities – was due to investors “swapping out of one and into the other.”

Elsewhere in the banking space, Bank of America Corp.’s 6.5% series Y noncumulative preferreds (NYSE: BACPY) rose 4 cents to $25.19.

Wells Fargo & Co.’s 8% series J class A noncumulative perpetual preferreds (NYSE: WFCPJ) then closed up 8 cents at $28.76.

Digital Realty improves

Digital Realty’s 7% series E cumulative redeemable preferreds (NYSE: DLRPE) go ex-dividend on Wednesday, resulting in the issue being one of the most actively traded issues of the day.

The paper closed up 9 cents at $26.20.

Holders of the preferreds will receive 43.75 cents per share, payable on March 31.

Digital Realty is a San Francisco-based real estate investment trust.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.