Morning Commentary: Inauguration takes focus away from preferreds; recent deals under pressure

By Stephanie N. Rotondo

Seattle, Jan. 20 – Preferred stock investors were keeping an eye on Inauguration Day on Friday, resulting in limited trading in the space, according to a trader.

The trader said that the buzz was that the incoming president, Donald Trump, planned to sign a few executive orders immediately after getting sworn in to office. Though it is not clear exactly which orders he will jump on, the trader speculated that the move could “shake things up.”

In early dealings, the Wells Fargo Hybrid and Preferred Securities index was down 23 basis points. However, the U.S. iShares Preferred Stock index was up 29 bps.

Among recently priced deals, Pennsylvania Real Estate Investment Trust’s $150 million offering of 7.2% series C cumulative redeemable preferreds were quoted at $24.80 bid, $24.84 offered.

That compared to $24.90 bid, $24.97 offered early Thursday.

The non-rated deal came Wednesday, upsized from $75 million and tight to the 7.375% area price talk.

Wells Fargo Securities LLC, Citigroup Global Markets Inc., Jefferies LLC, J.P. Morgan Securities LLC and Stifel Nicolaus & Co. Inc. ran the books.

Meanwhile, Medley LLC’s 7.25% $25-par notes due 2024 were seen in a $24.70 to $24.80 context.

The paper had been trading around $24.80 at mid-morning on Thursday.

The company initially sold $30 million of the notes on Jan. 13. On Wednesday, it was reported that the $4.5 million greenshoe had been fully exercised, bringing the total amount outstanding to $34.5 million.

FBR Capital Markets, Incapital, BB&T Capital Markets, Compass Point, Ladenburg Thalmann & Co. Inc., William Blair and JonesTrading were the joint bookrunners.

As for secondary pieces, a trader noted that Fannie Mae and Freddie Mac preferreds were attempting to rebound a little after getting hit Thursday.

Thursday’s weakness came as Steven Mnuchin, a former Goldman Sachs banker and Trump’s Treasury Secretary pick, said that the GSEs should not be recapitalized and released from government control.

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