Preferreds remain firm post-Fed; oil retreat weighs on energy; AmTrust to be admitted to NYSE

By Stephanie N. Rotondo

Phoenix, March 19 – Preferred stocks inched up a touch on Thursday as investors continued to react positively to the Federal Reserve’s latest policy announcement.

The Wells Fargo Hybrid and Preferred Securities index ended 3 basis points higher, though it was up 8 bps at mid-morning.

The central bank on Wednesday removed the word “patient” from its interest rate hike policy language but also maintained that it was in no hurry to jack up rates.

A trader said that even if the Fed does increase rates as early as June, as some are predicting, those rates may “stay there for a while.”

Still, the news has spurred investors to “rush back in to grab yield.”

That in turn helped Hancock Holding Co.’s $150 million of 5.95% $25-par notes due 2045, a deal from March 2, regain some ground.

A trader pegged the issue at $24.45 bid, $24.60 offered at mid-morning. He noted that the paper had closed out the midweek session at $24.10, though it had traded sub-$24.00 earlier in the day.

Energy names fall

The recent Fed comments had also given oil prices a boost late Wednesday, but come Thursday, “oil sold off a little bit again,” a trader said.

West Texas Intermediate crude closed down a buck, or 2.24%, at $43.66 a barrel, while Brent crude dropped $1.52, or 2.72%, to $54.39.

As such, “energy stocks were down in sympathy,” the trader said.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) fell 22 cents, or 1.04%, to $20.93. Goodrich Petroleum Corp.’s 10% series C cumulative preferreds (NYSE: GDPPC) declined 56 cents, or 6.88%, to $7.58, while the 9.75% series D cumulative preferreds (NYSE: GDPPD) lost 54 cents, or 6.59%, ending at $7.66.

Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) meantime ended off 17 cents at $20.32.

Calendar could get busy

On Monday, Moody’s Investors Service published its new bank rating methodology. Based on the new policy, several banks, including JPMorgan Chase & Co. and U.S. Bancorp, could soon see their noncumulative preferred stock ratings lifted to investment grade, according to one market source.

The possible rating changes, combined with the Fed’s new stance on an interest rate hike, could be a boon for the primary market.

“If the ratings are higher, we will see tighter spreads with the new issues,” a trader speculated. “This could help make the new issue calendar very busy.”

AmTrust set to list on NYSE

AmTrust Financial Services Inc.’s $165 million issue of 7.5% series D noncumulative preferred stock will list on the New York Stock Exchange on Friday, according to a market source.

The deal priced March 12. The ticker symbol is “AFSIPD.”

In addition to the listing news, the source said the deal’s greenshoe was partially exercised.

The company issued an additional $17.5 million of the preferreds, according to the source, lifting the total amount outstanding to $182.5 million.

The over-allotment option allowed the New York-based insurance company to sell up to $24.75 million additional shares.

The preferreds finished Thursday’s session at $24.90, down 12 cents from Wednesday’s close.

Morgan Stanley & Co. LLC, UBS Securities LLC and Keefe Bruyette & Woods Inc. were the bookrunning managers.

The shares are redeemable on or after March 19, 2020 at par plus accrued dividends.

Proceeds will be used for general corporate purposes, which may include working capital, capital expenditures and/or strategic acquisitions.

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