Morning Commentary: Preferreds ticking up; Targa plans sale of preferred units; UMH a no-show

By Stephanie N. Rotondo

Phoenix, Oct. 7 – The preferred stock market continued to firm up in early Wednesday trading.

The Wells Fargo Hybrid and Preferred Securities index was up 14 basis points at mid-morning.

A trader said that the buzz continues to be that the Federal Reserve will not raise interest rates this year. However, he noted that San Francisco Fed president John Williams “came out and said that that’s not the case, that they should be fine with liftoff this year.”

Either way, the trader opined that any rate increases were already priced into the market, so any impact should be minimal.

As the market has rebounded this week, the new issue pipeline has picked up momentum.

Targa Resources Partners LP announced a deal on Wednesday, a $75 million offering of series A cumulative redeemable perpetual preferred units.

Price talk is 9% to 9.125%, according to a market source.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunners.

A trader saw an early gray market of less 45 cents to less 15 cents.

“It’s a small deal,” he said of the issue and its wide market. “I think they will get it put away. I think people are a little nervous about the high coupon and the name.”

Still, he added that there is “always somebody” willing to take the risk.

There was meantime no word on UMH Properties Inc.’s planned sale of $50 million series B cumulative redeemable preferreds, a deal which was announced on Monday.

Price talk emerged on Tuesday, coming at 7.375% to 7.5%.

CSCA Capital LLC is running the books.

As for recently priced deals, the Southern Co.’s $1 billion of 6.25% $25-par series 2015A junior subordinated notes due 2075 – a deal that came Thursday – moved up again, being quoted at $25.03 bid, $25.07 offered. TravelCenters of America LLC’s $100 million of 8% $25-par senior notes due 2030 were also improving, with a trader pegging the notes at $24.80 bid, $24.85 offered.

That issue came Sept. 30.

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