Preferreds rebound on jobs number; Wells Fargo Real Estate, U.S. Cellular deals steady

By Stephanie N. Rotondo

Phoenix, Dec. 5 – After being under pressure all week, the preferred stock market was recovering ground Friday following a “bang up jobs number,” a trader said.

The Wells Fargo Hybrid and Preferred Securities index closed up 23 basis points.

In a Labor Department report released Friday, nonfarm jobs increased by the largest number since January 2012 in November, with 321,000 jobs being added.

Unemployment held at a six-year low of 5.8%.

A Commerce Department report then showed that wages improved by 9 cents on average for the month, the largest gain since June 2013.

But while the preferred market was gaining traction, it was doing so amid limited liquidity.

“It’s very light everywhere,” a trader said. “I thought we would see the [Treasury] bond market sell off a little bit and maybe some lower-coupon preferreds along with it.”

The trader speculated that market players were already getting ready to call it quits for the year.

“I think we are starting to get into early shutdown for the year on the institutional side,” he said. “On the retail side, nobody is going to be making any major adjustments.”

As that pertains to the primary, he said that so far for the month, that arena has been “lukewarm,” but that it wasn’t out of the realm of reason that “we could possibly see a few other deals” before the holidays.

Of the deals that have come so far this month, Wells Fargo Real Estate Investment Corp.’s $240 million issue of 6.375% series A cumulative perpetual preferred stock was “hanging” around $24.90 early in the session, according to a trader.

In the afternoon, the paper was quoted at $24.93 bid, $24.95 offered, according to a market source.

At the end of the day, the issue was pegged at $24.90 bid, $24.97 offered.

The deal priced Thursday, at the tight end of talk. It freed to trade on Friday.

There is a $35 million greenshoe.

Wells Fargo Securities LLC was the bookrunner. BofA Merrill Lynch, Morgan Stanley & Co. LLC and UBS Securities LLC were the joint lead managers.

When declared, dividends will be paid on a quarterly basis. The preferreds become redeemable on or after Dec. 11, 2019 but can be redeemed earlier upon the occurrence of a tax or regulatory event, or if the company has to register as an investment company.

The redemption price is par plus accrued dividends.

Proceeds will be used for general corporate purposes, including the acquisition of qualifying real estate investment trust assets. It is anticipated that net proceeds will be put toward reducing a line of credit.

Meanwhile, United States Cellular Corp.’s $275 million of 7.25% senior unsecured notes due 2063 were holding in a $24.85 to $24.87 context.

After the bell, a market source pegged the issue at $24.89.

That issue came Monday.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, RBC Capital Markets, UBS Securities LLC and Wells Fargo Securities LLC are running the books.

The Chicago-based wireless telecommunications company will use proceeds for general corporate purposes.

Goodrich pressured

Goodrich Petroleum Corp.’s preferreds weakened considerably Friday as oil prices remained under pressure.

The 9.75% series D cumulative preferreds (NYSE: GDPD) declined $1.96, or 19.1%, to $8.30. The 10% series C cumulative preferreds (NYSE: GDPPC) dropped $2.31, or 21.9%, to $8.24.

West Texas Intermediate crude oil fell $1.09, or 1.63%, to $65.72 per barrel. Brent crude oil dropped 84 cents, or 1.21%, to $68.80.

Goodrich is a Houston-based independent oil and gas exploration and development company.

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