Preferreds give back gains; sell-off in Fannie, Freddie paper continues; Goodrich drops

By Stephanie N. Rotondo

Seattle, Dec. 2 – Weakness was once again invading the preferred stock market on Wednesday.

The Wells Fargo Hybrid and Preferred Securities index closed down 19 basis points, nearly erasing the 20 bps climb on Tuesday.

One trader noted that the sell-off in Fannie Mae and Freddie Mac paper “seems to continue,” adding that the decline has “been pretty steady for the past two weeks.”

The losses have “been substantial,” the trader said. For some issues, the drop has amounted to as much as 30%, though on average he speculated that the paper has drifted down around 20% in the last couple of weeks.

“I’m not sure why, and it’s been on light volume,” he noted.

Still, the trader remarked that ongoing litigation – including a pending case in Iowa – could be the root of the problem.

Shareholders have several cases pending against the GSEs, as well as the federal government. Most center on the government’s 2012 conscription of a majority of the agencies’ profits.

Goodrich Petroleum Corp., which is exchanging its convertible and non-convertible preferred stock, said Tuesday that it was suspending dividends on all those issues for the fourth quarter.

Come Wednesday, the 10% series C cumulative preferreds (NYSE: GDPPC) and the 9.75% series D cumulative preferreds (NYSE: GDPPD) were declining.

The Cs closed off 16 cents, or 15.53%, at 87 cents. The Ds finished off 11.4 cents, or 11.79%, at 85.2 cents.

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