Fannie, Freddie rise as Bove sees settlement; Goodrich cancels dividends, preferreds drop

By Stephanie N. Rotondo

Phoenix, Aug. 31 – Preferred stocks were following the equity markets lower on Monday, though a trader noted that it was amid limited liquidity.

“It is dead,” he said.

The Wells Fargo Hybrid and Preferred Securities index ended down 8 basis points. The index was off 11 bps at mid-morning but came back to trade flat to even slightly better in the afternoon, only to retreat later in the day.

As for the equity markets, the Dow Jones industrial average fell over 115 points on the day, bringing the month’s total declines to about 6%. The weakness echoed that seen in the previous week, as investors grew more concerned about China’s economic instability.

Fannie Mae and Freddie Mac paper, however, was moving up as investors reacted to news out Friday regarding a potential settlement between shareholders and the federal government.

“They are all up 20 to 30 cents,” a trader said of the GSE preferreds.

Meanwhile, Goodrich Petroleum Corp. was on the decline after the company cut its dividend payments.

That softness came even as domestic crude oil prices popped 7.56% to trade at $48.64 a barrel for October delivery. Those gains were attributed to reports that OPEC members were willing to engage with producers in an effort to stem production amid a global oversupply and the resulting lower prices.

And while Goodrich preferreds were down on the day, other oil and gas preferreds were on the rise.

Vanguard Natural Resources LLC’s 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) gained 7 cents to close at $22.09, while the 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) jumped 36 cents, or 2.06%, to $17.87.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) meantime put on 22 cents, or 1.48%, finishing at $14.78.

Fannie, Freddie trend higher

Fannie and Freddie preferreds got a boost after Dick Bove, an influential analyst at Rafferty Capital, said on Friday that he believed the government was preparing to settle various shareholder lawsuits that had been brought in relation to the government’s sweep of the mortgage giants’ profits.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) gained 16 cents, or 3.35%, to end at $4.93. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) improved 18 cents, or 3.81%, to $4.91.

The belief stems from documents released in early August that showed the GSEs’ “CEOs were encouraged to overstate their instability,” a trader said. That in turn allowed the government to begin taking a majority of the GSEs’ quarterly earnings – which has already returned well over what the agencies’ took in the 2008 bailout.

Goodrich wanes

Goodrich Petroleum’s 10% series C cumulative redeemable preferreds (NYSE: GDPPC) and 9.75% series D cumulative redeemable preferreds (NYSE: GDPPD) were taking a beating on news the company was cancelling its dividends.

The Cs closed down 33 cents, or 12.41%, at $2.33. The preferreds were off $1.28, or 48.21%, at $1.38 at mid-morning.

The Ds fell 23 cents, or 9.54%, to $2.18, after being off $1.01, or 41.91%, at $1.40 at mid-morning.

The cancellation of the dividend – which will also impact the 5.375% series B cumulative convertible preferreds – was announced late Friday. If dividends are not paid on the Cs and Ds for six periods – consecutive or otherwise – holders of the shares can elect two additional directors to the company’s board. As for the Bs, the nixed payment means a 1% increase in the dividend rate until all accumulated payments are made in full.

© 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.