Preferreds see strong start to May trading; primary awaits new deals; oil weighs on sector

By Stephanie N. Rotondo

Seattle, May 2 – The preferred stock market was on the rise in Monday trading, kicking off the new month with a firm tone.

The Wells Fargo Hybrid and Preferred Securities index rose 30 basis points, or about 7.5 cents for $25-par paper. The index was up 9 bps at mid-morning.

A trader said that while there continued to be buzz about the possibility of a couple new deals this week, he had yet to see any further details.

“It’s just going to be quiet until something happens,” he said.

Among the more recent deals, Bank of America Corp.’s $900 million of 6% series E noncumulative preferreds (NYSE: BACPA) and Customers Bancorp Inc.’s $50 million of 6.45% series E fixed-to-floating rate noncumulative perpetual preferred stock (NYSE: CUBIPE) continued to make the most-active list – though liquidity overall was a bit subdued.

Bank of America’s preferreds were up 3 cents at $25.27. Customers Bancorp’s preferreds were up a like amount at $25.11.

Bank of America priced April 18. Customers Bancorp came a few days later on April 21. The primary has not seen a new deal hit the tape since then.

Despite the market’s strength, a decline in domestic crude oil from its 2016 highs was pressuring oil and gas-linked securities.

Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) were down 83 cents, or 13.45%, at $5.34. The 8% series A fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYP) were off 93 cents, or 15.05%, at $5.25.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were meantime seen falling 16 cents, or 7.48%, to $1.98.

The securities are not paying distributions.

For its part, domestic crude was down 2.22%, falling to under $45 a barrel as OPEC reported that its production rose to 32.64 million barrels per day in April, almost hitting the most recent highs.

April also saw a rise in exports from Iraq, as well as Russia.

Still, market participants are hoping that there are signs the oil space is in the process of naturally rebalancing, especially as U.S. active rigs fell again last week – the sixth consecutive decline, according to Baker Hughes – and non-OPEC production was expected to experience its biggest production decline in nearly two decades.

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