Morning Commentary: Preferreds gyrate to kick off week; Wells Fargo Real Estate lists on NYSE

By Stephanie N. Rotondo

Phoenix, Dec. 8 – Preferred stocks were gyrating a bit in early Monday trading, vacillating between off a touch and essentially unchanged.

The Wells Fargo Hybrid and Preferred Securities index was down 1 basis point at mid-morning.

Wells Fargo Real Estate Investment Corp.’s $240 million issue of 6.375% series A cumulative perpetual preferreds experienced a quick turnaround, as the deal has already listed on the New York Stock Exchange.

The deal priced Thursday.

The ticker symbol is “WFEPA.”

The paper was trading at $24.86 early in the session, down from $24.90 at the open.

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.

Meanwhile, TravelCenters of America LLC is said to be shopping around a $50 million offering of $25-par senior notes due 2029.

The company initially registered $57.5 million of the notes on Nov. 24.

Price talk is 8% to 8.125%, according to a trader.

The trader said the issue was trading in a $24.60 to $24.70 context in the early gray market.

Citigroup Global Markets Inc., Morgan Stanley, RBC Capital Markets and UBS Securities are the joint bookrunners. MLV & Co. LLC is the lead manager.

BB&T Capital Markets, Janney Montgomery Scott LLC and Oppenheimer & Co. are co-managers.

Away from new and recent deals, preferred securities linked to oil, natural gas and shipping were “getting hammered again,” a trader said.

Goodrich Petroleum Corp. was deemed “one of the most deserving of getting crushed,” as its 10% series C cumulative preferreds (NYSE: GDPPC) fell $1.54, or 18.69%, to $6.70 at mid-morning.

The trader noted that the paper has gone from trading around $21 to trading with a $6 to $7 handle in the past week.

“They are a true highly leveraged E&P,” he said. “It’s questionable whether they can survive long-term low oil prices.”

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