Morning Commentary: Preferred stocks firm after holiday weekend; BDC, REIT mergers abound

By Stephanie N. Rotondo

Seattle, Feb. 21 – After a long holiday weekend, the preferred stock market came back with a positive tone on Tuesday.

The Wells Fargo Hybrid and Preferred Securities index was up 12 basis points at mid-morning. The U.S. iShares Preferred Stock index was up 16 bps.

Despite the firmer feel, liquidity continued to be thin.

In issues that were active in early dealings, Morgan Stanley & Co. Inc.’s 5.85% series K fixed-to-floating rate noncumulative preferreds (NYSE: MSPrK) were a penny higher at $25.67. Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up a similar amount at $10.75.

Fannie paper had waned on Friday after the GSE reported its fourth-quarter results.

Meanwhile, a trader said there was “a lot of takeovers in the [business development company/real estate investment trust] area” announced early in the session.

Ashford Hospitality Trust Inc., for instance, said it was buying FelCor Lodging Trust Inc. for about $1.27 billion. Gladstone Investment Corp. then said it had purchased J.R. Hobbs, while B. Riley Financial Inc. said it was acquiring FBR & Co. in a $160.1 million all-stock deal.

Though there was nothing out of the primary space on Tuesday, a trader commented that he was “hearing a deal” for Wednesday. However, he did not have any details as to where that deal would come from.

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