Sotherly Hotels to price baby bonds; preferreds up then down; Wells Fargo down

By Abigail W. Adams

Portland, Me., Feb. 5 – After spending most of last week in the red, the preferreds market showed some positive momentum in early trading Monday but was unable to hold onto those early gains.

After spending much of last week heading lower, preferreds ended Monday in the red as well, in line with the decline of broader equity markets.

The primary market, which was quiet last week with only one baby bond offering pricing, began Monday with a new deal announcement. Sotherly Hotels LP plans to price an offering of three-year fixed-rate $25-par notes.

Several of Wells Fargo & Co.’s preferred stock and depositary shares saw large losses during Monday’s session, as the international banking and financial services company’s common stock also tanked.

The Federal Reserve slapped Wells Fargo with a consent cease and desist order on Friday, capping the growth of its assets until improvements are made.

Up and down

The preferreds market was off to a positive start on Monday but was unable to hold on to its early gains.

The Wells Fargo Hybrid & Preferred Securities Financial index was up 0.45 basis points early in Monday’s session. The U.S. iShares Preferred Stock ETF was up 0.04% early Monday.

However, the Wells Fargo Hybrid & Preferred Securities Financial index lost strength as Monday’s session progressed and closed the day down 4.37 basis points.

The U.S. iShares Preferred Stock ETF also lost strength closing Monday down 0.19%. The preferreds market was in negative territory for much of last week as well, as a long predicted pull back in equity markets began.

Sotherly to price

Monday began with a new offering of baby bonds on the horizon. Sotherly Hotels plans to price an offering of three-year fixed-rate $25-par notes.

Sandler O’Neill + Partners, LP and Stephens Inc. are joint bookrunners for the offering, which carries a greenshoe of 15% of the offering size, according to a company release.

The notes are freely callable on or after a specified date in 2019 at 101% of the principal amount plus accrued interest, according to the preliminary prospectus.

The notes will be listed on the Nasdaq Global Market under the ticker “SOHOK.”

Proceeds will be used, together with cash on hand and proceeds from additional financing to fund the acquisition of the Hyatt Centric Arlington Hotel in Arlington, Va. and for general corporate purposes.

Wells Fargo down

Several of Wells Fargo’s depositary shares took a hit on Monday, as investors respond to the consent cease and desist order the Federal Reserve placed on the company.

Wells Fargo’s depositary shares representing 1/40th of the company’s 8% series J non-cumulative perpetual class A preferred stock was down 9 cents, or 0.35%, to $25.70.

Wells Fargo depositary preferreds representing 1/1000th of the company’s 5.2% series N non-cumulative perpetual class A preferred stock was down 17 cents, or 0.71%, to $23.73.

Wells Fargo depositary preferreds representing 1/1000th of the company’s 5.85% series Q fixed-to-floating rate non-cumulative perpetual preferreds were down 34 cents, or 1.29%, to $25.96.

Wells Fargo depositary preferreds representing 1/1000th of the company’s 6.625% series R fixed-to-floating rate non-cumulative perpetual class A preferred stock was down 51 cents, or 1.83%, to $27.32 at market close Monday.

Wells Fargo depositary preferreds representing 1/1000th of the company’s 6% series T non-cumulative perpetual class A preferred stock was down 22 cents, or 0.86%, to $25.26.

Wells Fargo depositary preferreds representing 1/1000th of the company’s 6% series V non-cumulative perpetual class A preferred stock was down 26 cents, or 1.01%, to $25.51.

Wells Fargo depositary preferreds representing 1/1000th of the company’s 5.7% series W non-cumulative perpetual preferreds were down 37 cents, or 1.48%, to $24.59.

Wells Fargo depositary preferreds representing 1/1000th of the company’s 5.63% series Y non-cumulative perpetual preferred stock was down 17 cents, or 0.68%, to $24.69.

Wells Fargo depositary preferreds representing 1/1000th of the company’s 5.5% series X non-cumulative class A preferred stock was down 18 cents, or 0.73%, to $24.32.

The Federal Reserve’s consent cease and desist order caps Wells Fargo assets at its asset size at the end of 2017. Wells Fargo says it has $1.9 trillion in assets.

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