Preferreds see gains; 1347 sells $16 million 8% preferreds; Legacy Reserves rebounds

By Abigail W. Adams

Portland, Me., Feb. 23 – 1347 Property Insurance Holdings Inc. priced a downsized offering of $16 million, or 640,000 shares, of 8% series A perpetual cumulative preferred stock at $25.00 per share after the market close Friday.

The pricing is the first new issue of preferred stock since late January when volatility hit the broader markets.

However, investors did not find the deal from the Tampa, Fla.-based insurance holding company attractive, a market source said.

The preferreds market saw a week of straight gains with both the Wells Fargo Hybrid & Preferred Securities Financial index and the U.S. iShares Preferred Stock ETF up at the market close Friday.

The Wells Fargo Hybrid & Preferred Securities Financial index was up 0.38% and the U.S. iShares Preferred Stock ETF was up 0.32% at the market close.

The four-day winning streak breaks the downward trend in the preferreds market, which has seen mostly losses in February.

Dominion Resources’ 5.25% series A enhanced junior subordinated notes due 2076 saw heavy trading action on Friday, which pushed the notes up. The 5.25% notes had already eclipsed their three-month average trading volume less than two hours after the opening bell.

Legacy Reserves’ 8% series A and B fixed-to-floating rate cumulative redeemable preferred units were also up in high-volume trading on Friday. The Midland, Texas-based limited partnership focused on the acquisition and development of oil and natural gas properties released its fourth-quarter and year-end reports on Wednesday.

1347’s deal

1347 Property Insurance priced the first new preferred stock deal since late January after the market close on Friday. The insurance holding company priced $16 million, or 640,000 shares, of 8% series A perpetual cumulative preferred stock at $25.00 per share.

Boenning & Scattergood, Inc. is the bookrunner for the deal, which carries a greenshoe of $2.4 million, or 96,000 shares. American Capital Partners LLC and Joseph Gunner & Co. LLC are co-managers.

The deal was downsized from its initial size of $20 million, or 800,000 shares, with a greenshoe of $3 million, or 120,000 shares, according to the preliminary prospectus.

The deal was not well received during the subscription process, a market source said.

Dominion trades up

Dominion Resources’ 5.25% notes saw heavy volume trading on Friday, which pushed the preferreds up. The preferreds closed Friday at $23.89, an increase of 6 cents, or 0.25%.

The 5.25% notes had already eclipsed their three-month average trading volume less than two hours after the opening bell. The notes continued to trade heavily throughout the session with 174,120 of the notes in play compared to the three-month average trading volume of 89,930.

Legacy’s earnings

Legacy Reserves 8% series A and series B preferreds also saw heavy trading action on Friday, which pushed the preferreds up.

Legacy’s series A preferreds closed Friday at $6.24, an increase of 10 cents, or 1.63%.

Legacy’s series B preferreds closed Friday at $6.21, an increase of 20 cents, or 3.33%. Both the series A and series B preferreds saw more than double their average trading volume on Friday.

Legacy released its fourth-quarter and year-end reports on Wednesday. Legacy reported a net loss of $25.32 million for the fourth-quarter, or a net loss of 41 cents per common share. Legacy reported a net loss of $53.89 million, or $1.01 per common share for 2017.

Legacy reported EBITDA of $226.2 million for 2017, which beat guidance and was a 45% year-over-year increase. The company forecast EBITDA of $330 million in 2018.

Legacy’s preferreds have ricocheted between gains and losses since January when the company announced its debt reduction plan. The plan initially sent the preferreds soaring more than a $1 to the $6.50 range in mid-January.

However, the preferreds dropped after Moody’s Investors Service lowered Legacy’s speculative grade liquidity rating to SGL-4 from SGL-3 and changed the outlook to negative due to the debt reduction plan.

Legacy has not paid dividends on its preferreds since January 2016 but the preferreds are cumulative.

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