Interest rate fears driving preferreds down; Goodrich prices $120 million of preferreds

By Stephanie N. Rotondo

Phoenix, Aug. 14 - Preferred stocks were "getting hit again," a trader said Wednesday.

The market has been on the soft side for several weeks now, he remarked, adding that "sooner or later" it should reverse course.

"Preferred spreads have widened out considerably," he said, as fears of rising interest rates have plagued the market. With spreads at their widest point since 2011, he opined that the resulting sell-off "seems overdone."

"There's a real lack of liquidity," he said. "The only direction is down as bids get tapped."

"The market was pretty much on a slide until about 3 p.m.; then it bounced up a little," another market source said. However, the market was still soft on the day.

The day did see one new issue hitting the tape, as Goodrich Petroleum Corp. said it was selling series D cumulative perpetual preferreds.

Price talk was around 9.75%, according to a trader.

The trader saw the issue at $24.60 bid in the midday gray market.

The issue came after the close in line with talk, with $120 million of the preferreds being sold.

"They priced more than last time and tighter too, even though the market is down," a source said. He saw the issue at $24.75 bid.

Morgan Stanley & Co. LLC and UBS Securities LLC are the joint bookrunning managers. Janney Montgomery Scott LLC, J.P. Morgan Securities LLC, MLV & Co. LLC and Sterne Agee & Leach Inc. are the joint lead managers.

The new issue was meantime putting pressure on the company's 10% series C cumulative preferreds (NYSE: GDPPC), which were down 70 cents, or 2.62%, at $26.00.

In other recent issues, Integrys Energy Group Inc.'s $400 million of 6% fixed-to-floating rate junior subordinated notes due 2073 were "just hanging around" $24.52 bid, $24.55 offered at midday.

The paper had closed Tuesday around par. The issue priced Monday and freed to trade early on Wednesday.

"That is one of the worst underwritten deals in a long time," a source said.

The source said the day's volume weighted average price was $24.54.

The source noted that the issue was priced "against long-term positions. They didn't sell it to permanent investors."

He added that over 5 million of the notes changed hands, which equaled about a third of total issuance.

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