Commodity weakness hurts related preferreds; New Source Energy preferreds stop trading

By Christine Van Dusen

Atlanta, Dec. 7 – Trading of New Source Energy Partners' series A preferred stock was suspended on Monday, suffering alongside other energy-related names as plummeting oil prices took their toll on the market.

The Oklahoma City-based independent oil and natural gas properties company’s 11% cumulative convertible preferreds got “hammered” before trading was suspended, a trader said.

“That’s a little sketchy,” he said.

New Source recently announced that its revenue, profitability and cash flow have been significantly affected as a result of the substantial drop in oil, natural gas and NGL prices and the related significant drop in rig count.

The company has also said it may not have sufficient funds to cover its operational and financial obligations over the next 12 months, raising substantial doubt as to its ability to continue as a going concern.

Weakness in commodities also hurt Breitburn Energy Partners LP, which saw its 8.25% series A cumulative redeemable preferred units (Nasdaq: BBEPP) fall to $5.58 on Monday morning after declining 12.85% to $6.85 last week. The notes clawed some of the way back up by the end of Monday's session, closing at about $6.76.

Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) were also weaker, moving to $7.79 on Monday morning after declining 8.12% to $8.71 last week. The notes closed Monday even lower, at $7.24.

Looking to recent deals, the new issue of preferreds from Prospect Capital Corp. – $150 million of 6.25% $25-par notes due 2024 – traded Monday between $24.65 and $24.75 after Friday's $24.70 bid, $24.75 offered, a trader said.

UBS Securities LLC, BofA Merrill Lynch, Morgan Stanley & Co. LLC and RBC Capital Markets ran the books.

Eagle Point sees little activity

There was little action for the recent issue from Eagle Point Credit Co. Inc. The $25 million of 7% $25-par unsecured notes due 2020, which came to the market via Incapital LLC, traded last week at $24.

“I haven't seen anything on that at all,” a trader said on Monday.

The company’s existing 7.75% series A preferred stock dipped 8 cents on Monday morning to $25.66.

Cherry Hill Mortgage on tap

Cherry Hill Mortgage Investment Corp. is planning to issue series A cumulative redeemable preferred stock at a liquidation preference of $25.00 per share, according to a company filing.

Dividends will be payable quarterly on each Jan. 15, April 15, July 15 and Oct. 15, beginning on April 15,

The preferreds will be callable at $25.00 per share plus accumulated and unpaid dividends.

In the event of a change of control, stockholders will have the right to convert some or all of their shares into a number of shares of common stock.

Morgan Stanley, UBS Investment Bank, Keefe, Bruyette & Woods and Citigroup are the joint bookrunning managers for the Securities and Exchange Commission-registered deal. Barclays, FBR, JMP Securities and Ladenburg Thalmann are the co-managers.

The proceeds will be used for general working capital purposes, including the repayment of debt.

The Moorestown, N.J.-based company intends to list the stock on the New York Stock Exchange under the symbol “CHMI-PRA.”

“You have to know and like the company,” a trader said. “Haven’t seen any markets on it.”

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