Morning Commentary: Pimco outflows continue; Qwest preferreds dip; Pebblebrook unchanged

By Christine Van Dusen

Atlanta, Sept. 30 – The preferred stock market was quiet on Tuesday as investors prepared for the fourth quarter and money continued to flow out of Pimco funds in the wake of founder Bill Gross’ move to Janus Capital Group.

Since Gross surprised the market on Friday with this announcement, more than $10 billion has left Pimco, which manages about $2 trillion in assets.

“We’re still seeing outflows,” a trader said, and “also seeing a sell-off in Freddie Mac and Fannie Mae preferreds, though that could just be profit-taking for the quarter end.”

In other news, Qwest Corp.’s new $500 million issue of 6 7/8% $25-par senior notes due 2054 traded Tuesday morning at $24.35, dipping from Monday’s $24.40 and matching Friday’s low, a trader said.

The Monroe, La.-based telecommunications company has two 7% issues coming due in 2052, one in April and one in July. Both were recently spotted trading above par.

Also on Tuesday, Pebblebrook Hotel Trust’s 6.5% series C cumulative redeemable preferred shares traded at $24.30, unchanged, following additional issuance the previous week.

The company issued $25 million more of the securities at a liquidation preference of $25.00 per share, according to a 424B5 filing with the Securities and Exchange Commission.

Wells Fargo Securities LLC is the underwriter for the SEC-registered deal.

In April the company said underwriters fully exercised the over-allotment option for another 400,000 shares of its 6.5% series C cumulative redeemable preferred shares, bringing the total deal size to $100 million.

As previously reported, Pebblebrook originally priced $90 million of the preferreds on March 11, 2014 with Raymond James & Associates Inc. and Citigroup Global Markets Inc. as the joint bookrunners.

Proceeds from the offering will be contributed to the operating partnership, which will then use the funds for general corporate purposes, including acquiring and investing in hotel properties and reducing debt.

The Bethesda, Md.-based real estate investment trust will report quarterly earnings on Oct. 23.

In other trading of preferreds on Tuesday, Barclays Bank plc’s 7.1% non-cumulative callable dollar preference shares, series 3 ADR, traded up 6 cents at $25.69 on just 80,174 shares traded.

Barclays’ 8 1/8% non-cumulative callable dollar preference shares, series 5 ADR, moved up 2 cents to $25.92 on 43,137 shares traded.

And RBS Capital Funding Trust V’s 5.9% noncumulative guaranteed trust preferred securities dipped 2 cents to $23.60 on 38,297 shares traded on Tuesday morning.

“It’s very quiet with month-end and quarter-end,” a trader said. “We’re probably seeing people cleaning up positions and preparing for the fourth quarter.”

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