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Morning Commentary: Preferreds up; RAIT Financial tanks after conclusion of review
By Abigail W. Adams
Portland, Me., Feb. 21 – Preferreds were off to an upbeat start on Wednesday with both the Wells Fargo Hybrid & Preferred Securities Financial index and the U.S. iShares Preferred Stock ETF seeing gains in early trading.
The Wells Fargo Hybrid & Preferred Securities Financial index was up 0.16% and the U.S. iShares Preferred Stock ETF was up 0.09% early in Wednesday’s session.
While the broader market was up, RAIT Financial Trust’s preferreds were not. The Philadelphia-based real estate investment trust’s 7.75% series A and 8.875% series C cumulative redeemable preferred shares nosedived early in Wednesday’s session.
The 7.75% series A preferred shares were down $6.17, or 39.37%, to $9.50 in early trading. With 44,890 shares in play, the trading volume of the preferreds had already exceeded the three-month average trading volume of 28,460.
RAIT’s 8.875% series C preferred shares were down $8.00, or 44.44%, to $10.00 early in Wednesday’s session. With 25,520 shares in play, the series C preferreds also far exceeded their three-month average trading volume of 6,230 just one hour after the opening bell.
RAIT announced on Tuesday that the special committee appointed to conduct a review of strategic and financial alternatives for the trust had concluded their work.
The review considered the potential sale of all or a part of the trust. However, the board of directors did not feel the review identified “a suitable strategic or financial transaction with another counterparty that was preferable,” to the course of action RAIT will take, according to a company release.
Instead, RAIT will take steps to increase liquidity and position itself to better meet its financial obligations by ceasing its lending business, selling property in its portfolio, and hiring a financial adviser to help in the process, according to a company news release.
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