Preferred stocks strong, trading muted; American Realty shares weaken amid more bad news

By Stephanie N. Rotondo

Phoenix, Nov. 3 – A trader said the preferred stock market was a bit subdued Monday as investors were eyeing Tuesday’s elections.

“I wouldn’t be surprised if we saw a deal or two this week,” he remarked, adding that issuers will likely wait until the elections are over.

“Volume was generally pretty light,” one market source said. “But it’s Monday.”

Gladstone Investment Corp. announced plans to sell monthly paying series B cumulative term preferred stock. The company plans to use proceeds to pay down its debt.

The secondary market meantime remained firm.

The Wells Fargo Hybrid and Preferred Securities index closed up 13 basis points.

But despite the generally positive tone of the market, American Realty Capital Properties Inc.’s 6.7% series F cumulative redeemable preferred stock (Nasdaq: ARCPP) continued to weaken as more bad news rolled out.

The preferreds fell $1.11, or 5.04%, to $7.85. The common stock (Nasdaq: ARCP) then fell $1.02, or 11.5%, to $7.85.

In the company’s bond debt, a trader said the 3% notes due 2019 dropped 3 points to a 93 to 94 context.

In a regulatory filing on Wednesday, American Realty said that its financial statements dating back to 2013 could not be relied upon due to intentional errors and other errors that were intentionally left incorrect.

On the heels of that news, the company also disclosed that chief financial officer Brian Block and chief accounting officer Lisa McAlister had resigned from their posts.

Come Monday, it was reported that the Federal Bureau of Investigation was launching its own criminal probe regarding the accounting issues.

Also on Monday, RCS Capital Corp. said it was calling off its $700 million buyout of American Realty’s Cole Capital Partners. In a statement released early Monday, American Realty said it had received word of the deal’s cancellation “in the middle of the night.”

“As we informed RCS orally and in writing over the weekend, RCS has no right and there is absolutely no basis for RCS to terminate the agreement,” the company said. “Therefore, RCS’s attempt to terminate the agreement constitutes a breach of the agreement. In addition, we believe that RCS’s unilateral public announcement is a violation of its agreement with ARCP.”

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