Goodrich preferreds rise despite earnings miss; American Realty up ahead of numbers

By Stephanie N. Rotondo

Phoenix, Feb. 27 – After being strong all week, the preferred stock market ended Friday’s session in line with that trend.

The Wells Fargo Hybrid and Preferred Securities index closed 8 basis points higher.

Goodrich Petroleum Corp. reported a fourth-quarter loss on Friday. Despite the loss, a rebound in oil prices was helping the company’s preferreds gain momentum.

West Texas Intermediate crude gained $1.10, or 2.28%, closing at $49.27 per barrel. Brent crude rose $2.01, or 3.35%, to $62.06.

Meanwhile, American Realty Capital Properties Inc. was also ending with a firm tone after the New York-based real estate investment trust was granted approval to modify one of its restated financial statements from 2013.

The company is slated to give a business update along with its third-quarter results on Monday.

Goodrich paper gains

Goodrich Petroleum’s earnings fell short of estimates, but its bonds were trending higher anyway, according to a trader.

In the company’s preferreds, the 10% series C cumulative preferreds (NYSE: GDPPC) ended up $1.25, or 15.53%, at $9.30. The 9.75% series D cumulative preferreds (NYSE: GDPPD) improved $1.14, or 14.25%, to $9.14.

As for the company’s debt, a trader said the 8 7/8% notes due 2019 rose 2½ points to 44½.

For the quarter, the Houston-based oil and gas company posted a loss of $225.8 million, or $5.23 per share. On an adjusted basis, the loss was 47 cents per share.

Analysts polled by Zacks Investment Research had forecast a loss of 46 cents per share.

Revenue was $48.6 million for the quarter. That also came in below expectations of $57 million.

For the full year, net loss increased to $353.1 million, or $8.62 per share. Revenue was $208.6 million.

In addition to announcing its earnings, Goodrich also said that it was planning a $100 million offering of 8% senior secured notes due 2018. The sale will include warrants to purchase up to 4.88 million common shares at an exercise price of $4.66, a 10% premium over Thursday’s closing price.

The company has the option to sell another $75 million of the notes in the future.

The new issue was not the last of the news the company had to offer. Goodrich said that it had amended its first-lien credit facility in order to extend the maturity to February 2017. The borrowing base was also reset to $200 million and will be reduced to $150 million upon closing of the sale of the second-lien notes.

American Realty firms

American Realty Capital’s preferreds (Nasdaq: ARCPP) closed up 20 cents at $23.58 on Friday.

Investors are preparing for the company’s earnings release on Monday. The company is also expected to deliver restated results from 2012 and 2013, which were called into question after certain accounting irregularities were discovered in October.

The accounting issues resulted in the termination of several top management employees, as well as the ouster of founder and chairman Nicholas Schorsch.

AmEx deal steady

The new American Express Co. deal – $850 million of 4.9% $1,000-par series C fixed-to-floating rate noncumulative preferreds – was just treading water Friday, as a trader quoted the issue at 99.75 bid, par offered.

The deal came Wednesday via Barclays, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, RBC Capital Markets and Wells Fargo Securities LLC.

Initial price talk was 5.25%. The dividend begins floating March 15, 2020 at Libor plus 328.5 bps.

More high yield preferreds?

Meanwhile, underwriters of high-yield bonds are looking at the possibility of adding preferred stock to the funding mix in response to new bank regulations, according to a source.

The possibility surfaced during a discussion at the JP Morgan Global High Yield & Leveraged Finance Conference this past week about the question of what the largest amount of issuance a single issuer could bring at one time, an investor told Prospect News.

In a roundtable discussion there seemed to be some consensus that the right issuer – for example HCA, Inc., the buysider said – could bring $30 billion.

To the gasp that ensued, the investor replied by pointing out that in April 2014 Altice and its 40% owned Numericable Group AG combined to bring a record-setting €12 billion equivalent of high-yield bonds in seven tranches, in a deal that was said to have played to as much as $100 billion of aggregate demand.

The “$30 billion” number is assuming that leverage is below six times, the source added.

The six-times leverage threshold is presently under careful consideration by the banks, the investor added.

Beyond that threshold bank regulators are putting deals under the microscope, the source said.

One possible structure which might help to keep high-yield financings beneath that threshold is a bond/preferred share issuance model, which the banks are now considering, the source said.

-Paul A. Harris contributed to this review

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