Sotherly prices baby bonds; another down day for preferreds; JPMorgan, CHS see high volume

By Abigail W. Adams

Portland, Me., Feb. 8 – After breaking into positive territory on Wednesday, Thursday was another down day for preferreds with both the Wells Fargo Hybrid & Preferred Securities Financial index and the U.S. iShares Preferred Stock ETF seeing losses.

Despite the volatility in the market, Sotherly Hotels LP priced $25 million in 7.25% three-year $25-par notes after the market close on Thursday. The offering was announced prior to the market open on Monday.

Trading volume was “on the lighter side” on Thursday, a market source said. However, CHS Inc.’s 7.5% class B cumulative redeemable preferred stock, series 4, saw heavy volume trading that far outstripped its three-month average.

JPMorgan Chase & Co.’s depositary shares representing the company’s 6.15% series BB non-cumulative preferred stock and 6.1% series AA non-cumulative preferred stock also saw above average trading volume which pushed the depositary shares down.

Another down day

The preferreds market saw another down day on Thursday in lock-step with broader equity markets. While preferreds are fixed-income instruments, there is a correlation with common stock, a market source said.

The Wells Fargo Hybrid & Preferred Securities Financial index closed Thursday down 0.39% and the U.S. iShares Preferred Stock ETF was down 0.70%. While the preferreds market has been down, many preferreds still faired better than the common stock, the source said.

Sotherly Hotels prices

Despite the turbulence in the market, Sotherly Hotels priced an offering of $25 million of 7.25% three-year $25-par notes after the market close on Thursday.

Sandler O’Neill + Partners, LP was left lead bookrunner and Stephens Inc. was passive bookrunner for the offering, which carries a greenshoe of $3.75 million, according to a company release.

The notes are freely callable on or after Feb. 15, 2019 at 101% of the principal amount plus accrued interest, according to the term sheet.

The Williamsburg, Va.-based lodging real estate investment trust focused on the acquisition, renovation, and upbranding of upscale full-service hotels expects proceeds of $24 million.

Proceeds will be used to fund the acquisition of the Hyatt Centric Arlington Hotel in Arlington, Va.

High volume

The preferreds market saw light trading volume on Thursday, according to a market source.

However, some names were in focus and experienced high volume trading.

CHS’ 7.5% class B cumulative redeemable preferred stock, series 4, which trades under the ticker “CHSCL,” outstripped their three-month average trading volume early in the session.

The diversified global energy, grains and food business saw a trading volume of 409,000 shares on Thursday. Its average trading volume was 31,800.

The preferreds were trading down 7 cents, or 0.25%, to $27.42 early in the session. They continued to trade down, closing Thursday at $27.36, a decrease of 13 cents, or 0.47%.

The high volume trading may be a delayed reaction to CHS’ first-quarter earnings report, which was released mid-January, a market source said.

JPMorgan Chase & Co.’s depositary shares representing the company’s 6.15% series BB non-cumulative preferred stock and 6.1% series AA non-cumulative preferred stock also experienced heavy trading volume.

The depositary shares representing the 6.15% preferred stock, which trades under the ticker “JPMPrH,” closed Thursday at $25.58, a decrease of 7 cents, or 0.27%.

The shares saw more than double their average trading volume with 203,000 in play on Thursday versus the average of 86,560.

The depositary shares representing the 6.1% preferred stock, which trades under the ticker “JPMPrG,” was down 12 cents, or 0.47%, to $25.51 early in the session.

The preferreds rallied to cut their losses but were still down at market close.

The preferred closed Thursday at $25.60, a decrease of 3 cents, or 0.12%. Trading volume during Thursday’s session was more than 5 times the shares’ average.

More than 531,000 shares traded versus the average of 73,850.

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