Preferreds firm as jobs number rises; Star Bulk’s $25-par notes list; American Realty up

By Stephanie N. Rotondo

Phoenix, Nov. 7 – A preferred stock trader said “the jobs number was a little better than expected,” pushing Treasuries higher.

Preferred stocks were also rising, as the Wells Fargo Hybrid and Preferred Securities index closed up 31 basis points.

In a report published Friday, the Labor Department said that employers added 214,000 jobs in October. With that addition, the unemployment rate fell to 5.8%.

Star Bulk Carriers Corp.’s $50 million of 8% $25-par senior notes due 2019 – a deal that priced Oct. 30 – began trading on the Nasdaq Global Select Market on Friday.

The ticker symbol is “SBLKL.”

A trader quoted the issue at $24.56 bid, $24.60 offered. The notes ended the day at $24.58, compared to opening levels of $24.60.

Morgan Stanley & Co. LLC, Stifel Nicolaus & Co. Inc., Jefferies Inc. and Deutsche Bank Securities Inc. were running the books.

Interest will be payable on a quarterly basis. The notes become redeemable on or after Nov. 15, 2016 at par plus accrued interest.

Prior to Nov. 15, 2016, the Athens-based international shipping company can redeem the notes at par plus accrued interest plus a make-whole premium of Treasuries plus 50 bps.

The notes are also redeemable upon a taxation change at par plus accrued interest.

Upon a change of control, holders of the notes have the right to require the company to repurchase the notes at 101% of par plus accrued interest.

Proceeds will be used for general corporate purposes, including working capital, capital expenditures, research and development, the repayment of debt, stock repurchases or financing possible acquisitions and investments.

American Realty gains

American Realty Capital Properties Inc.’s 6.7% series F cumulative redeemable preferreds (Nasdaq; ARCPP) finished the week with a firm tone as it was reported that recently disclosed accounting errors were tied to manager and employee bonuses.

The preferreds closed at $21.75, up 2 cents.

Last week, the real estate investment trust announced that it was under investigation by the Securities and Exchange Commission due to accounting issues discovered in its earnings dating back to 2013.

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.”

On Friday, Edward Rendell, a former governor of Pennsylvania and an independent director of the company – as well as a member of the audit committee – was reported as saying that the mistake was due to bonuses computed for managers and employees.

But Rendell said that the losses in the common stock incurred following the news was overblown, as the errors had nothing to do with the company’s “core business.”

“Everyone in the market is making a mountain out of a molehill here,” Rendell said, according to a Wall Street Journal report. “This doesn’t go to the core business at all. It doesn’t go to what the company does.”

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