Preferreds firm ahead of bank earnings; recent issues from Tsakos, Global Indemnity list

By Stephanie N. Rotondo

Seattle, April 10 – Preferred stocks were trending upward as the week began, and investors were gearing up for bank earnings.

The Wells Fargo Hybrid and Preferred Securities index finished 11 basis points better. The U.S. iShares Preferred Stock ETF improved 34 bps.

But while the day had a firm tone, it wasn’t a very busy one.

“It was not a busy day,” one market source said. Furthermore, he opined that it would “not be a busy week,” given the shortened timeframe due to the Easter holiday.

Bank earnings are also likely playing a role, as investors tend to sit on the sidelines ahead of such events.

As the market eyes the earnings season, a source speculated that the results are “expected to be positive.”

“The market is expecting them to be fairly positive,” the source said. “If it’s not good, or even if it’s neutral, that will be viewed as a negative.”

The new issue market remained quiet as well. That is due in part to bank earnings, but also to a “lack of clarity, uncertainty, or whatever you want to call it,” the source said, in terms of the Trump Administration’s proposed tax plan, moves on banking regulations and the budget.

Such a lack of clarity is “never good for the markets,” the source said.

Add to that “an aircraft carrier hanging around in the Korean Peninsula” and last week’s bombing of Syria, and the equation gets that much more dicey.

In fact, it was reported Monday that president Donald Trump’s much-hyped tax plan was scrapped and the administration has gone back to the drawing board. That could mean that expectations of an August reveal will be dashed.

One source said he wasn’t all that surprised by the expected delay, as he had predicted a tax plan couldn’t be formulated until at least mid-2018.

“But certainly the market put some credence” to Trump’s promises that the plan would be unveiled soon.

As for the day’s preferred dealings, Tsakos Energy Navigation Ltd.’s $115 million of 9.25% series E fixed-to-floating rate cumulative redeemable preferred stock began trading on the New York Stock Exchange on Monday, under the ticker symbol “TNPPrE.”

The preferreds closed at $25.31 and were deemed the day’s most active security. The preferreds were seen at $25.29 in early dealings, which compared to $25.73 at the open.

The $100 million deal came March 29, upsized from $50 million and in line with the 9.25% area price talk. On April 3, it was reported that a $15 million greenshoe had been exercised, bringing the total amount outstanding to $115 million.

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, UBS Securities LLC, Citigroup Global Markets Inc. and Stifel Nicolaus & Co. Inc. ran the books.

Meanwhile, Global Indemnity Ltd.’s $130 million of 7.875% $25-par subordinated notes due 2047 were admitted to the Nasdaq Global Select Market under the ticker symbol “GBLIL.”

That paper ended at $24.83. That compared to $24.97 at mid-morning, down from $25.05 at the open.

The company initially sold $120 million of the notes on March 16. On March 30, it was announced that $10 million of an $18 million greenshoe had been exercised.

The deal came upsized from $75 million and at the tight end of the 7.875% to 8% price talk.

Morgan Stanley, UBS Securities and RBC Capital Markets were the joint bookrunners.

Among more established issues, Fannie Mae and Freddie Mac were relatively busy, considering the general lack of liquidity. The GSE-linked preferreds gyrated throughout the day, with Fannie eventually ending slightly lower and Freddie slightly higher.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) dipped a penny to $5.64, while Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) rose a nickel to $5.37.

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