Preferreds rise as jobless claims fall, pare gains by day's end; Legacy Reserves brings issue

By Stephanie N. Rotondo

Phoenix, April 10 - Preferred stocks moved higher Thursday as jobless claims fell to their lowest level since May 2007.

The Wells Fargo Hybrid and Preferred Securities index was up 20 basis points as of mid-morning. But as the day wore on - and the common equity market tanked - the index gave back a little, ending the day up just 7 bps.

Still, a trader said that "it seems like no one is focused on the market." He speculated that investors could be sitting on the sidelines waiting for bank earnings, which are slated to begin Friday with Wells Fargo & Co. and JPMorgan Chase & Co.

"It usually gets quiet [ahead of earnings]," another market source said.

The banks' preferreds were moderately busy Thursday ahead of the results.

The securities all did fairly well. JPMorgan's 6.7% series T noncumulative preferreds (NYSE: JPMPB) rose a nickel to $25.61. Wells Fargo's 5.85% series Q fixed-to-floating-rate noncumulative perpetual preferreds (NYSE: WFCPQ) were steady at par, while the 5.2% series N class A noncumulative perpetual preferreds (NYSE: WFCPN) inched up 3 cents to $21.35.

Talk continues to swirl about the possibility that the new issue pipeline could get heavier after Easter, and with the new jobs data, "it should be a good environment to bring issues," a trader said.

"I would expect some banks to be issuing," another source said, noting that such issues won't come until after the latest quarterly results are out.

Legacy brings $50 million

On Thursday, Legacy Reserves LP priced $50 million of series A fixed-to-floating-rate cumulative preferred units at par to yield 8%. The deal came after the market closed.

The company had announced plans earlier in the day to sell at least $35 million of the preferreds.

Price talk was 8% to 8.25%, according to a trader.

Stifel Nicolaus & Co. Inc., Barclays and MLV & Co. LLC are the joint bookrunning managers. Janney Montgomery Scott LLC and Ladenburg Thalmann & Co. Inc. are the co-managers.

Prior to pricing, a trader said he had yet to see any gray markets for the units given the deal's small size.

Meanwhile, RAIT Financial Trust's $60 million of 7.625% $25-par senior notes due 2024 finally freed from the syndicate early in the session.

The deal priced Monday and was expected to free up Wednesday morning.

Upon freeing, the notes moved up a fair bit, according to a trader. He pegged the securities at $24.94 bid, $24.97 offered, which compared with previous levels around $24.75.

Ally falls with IPO

Ally Financial Inc. had its trading debut Thursday as the company sold 95 million common shares at $25.00 each.

The company raised $2.38 billion in the offering, the proceeds of which will go to the U.S. Treasury, which holds a 17.1% stake in the company. The payment will mean that the federal agency has made a $500 million profit on its $17.2 billion bailout investment.

However, the new stock (NYSE: ALLY) didn't do so hot in its first trading day, falling $1.02, or 4.08%, to $23.98.

Ally's preferreds were also getting squeezed. The 8.5% series A fixed-to-floating-rate perpetual preferreds (NYSE: ALLYPB) fell 2 cents to $27.33, and the 8.125% series 2 fixed-to-floating-rate trust preferred securities (NYSE: ALLYPA) dropped 4 cents to $27.25.

Ally's management said it is expecting the government to fully divest its stake in the company by the end of the year.

Commonwealth busy

Commonwealth REIT's 6.5% series D cumulative convertible preferreds (NYSE: CWHPD) were quite busy on the day as investors reacted to a conversion of the preferreds.

The paper was up 51 cents, or 2.02%, at $25.77.

The Newton, Mass.-based real estate investment trust announced late Wednesday that because of a recent "fundamental change" - the company's board of directors was recently voted out, constituting a change of control - holders have a right to convert their preferreds into common stock.

Holders have until May 14 to convert.

HSH gains despite loss

HSH Norbank AG reported a huge loss on Thursday, but its 7.25% perpetual debt rose over 3 points anyway, according to one bond trader.

He pegged the issue at 38. The paper had gained 4 points in the previous session.

The trader noted that the debt was trading around 32 at the end of 2013.

For the entirety of 2013, the lender - the world's largest financier of ships - posted a loss of €814 million, which compared with a loss of €124 million in 2012. The year marked the largest loss the company has posted since 2008, when the collapse of Lehman Brothers resulted in a loss of €3 billion for the German company.

The containership industry's struggles are what is pressuring the company, as ship charter prices decline and most shipping companies are dealing with an overcapacity of vessels. For its part, HSH cut its shipping portfolio to €21 billion from €23 billion in the fourth quarter and increased risk provisions for that sector to €3.3 billion from €2.7 billion.

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