Preferreds slide; Two Harbors brings upsized $125 million deal; New York Community on tap

By Stephanie N. Rotondo

Seattle, March 7 – The preferred stock market was under pressure in Tuesday dealings on the heels of a new GOP-led plan to repeal Obamacare and replace it with what is being dubbed “TrumpCare.”

The market is also a little shaky as investors look for more details out of the White House over its tax plans, as well as its efforts to reduce regulations.

Additionally, markets are preparing for interest rates to move higher in the coming weeks, with the Federal Reserve’s Federal Open Market Committee meeting set for next week.

The Wells Fargo Hybrid and Preferred Securities index declined 22 basis points. The U.S. iShares Preferred Stock index was down 29 bps.

A new deal was added to the tape on Tuesday from Two Harbors Investment Corp.

The deal was originally slated to be a $75 million offering of series A fixed-to-floating rate cumulative redeemable preferred stock, with price talk in an 8.125% to 8.25% range. The deal was eventually upsized to $125 million and priced at the tight end of talk.

“It looks like they’re all just trying to get these higher coupon issues out of the way,” a trader remarked.

He saw the issue at $24.60 bid, $24.75 offered in the early gray market.

Morgan Stanley & Co. LLC, UBS Securities LLC and Keefe Bruyette & Woods Inc. are running the books.

The market was also waiting for an offering of series A fixed-to-floating rate noncumulative preferreds from New York Community Bancorp Inc.

That deal was announced late Monday. However, there were no gray market quotes on the paper in early Tuesday trading, according to one trader.

“I don’t know much about [the deal] other than the press release,” another source commented, adding that he had also heard “a bunch of speculations from equity analysts who don’t know as much as they think they do regarding [the preferred] market.”

Goldman Sachs & Co., Credit Suisse Securities LLC and BofA Merrill Lynch are the bookrunners.

Calls with potential investors were reportedly going on throughout Tuesday’s session, with more planned for early Wednesday.

As for deals that have already priced, Monmouth Real Estate Investment Corp.’s 6.125% series C cumulative redeemable preferreds (NYSE: MNRPrC) were weaker after the company brought a $75 million add-on to the issue on Monday.

The paper ended the day at $24.30, down a dime.

Under the add-on, the preferreds were sold at $24.50 apiece.

With the latest issuance, $210 million of the preferreds are outstanding, including the $135 million originally sold in September.

Rounding out recent deals, Apollo Global Management LLC’s 6.375% series A preferreds – a $250 million deal priced Feb. 28 – are expected to list on the New York Stock Exchange on Wednesday, a market source reported.

The ticker symbol will be “APOPrA.” The preferreds have been trading under a temporary symbol, “APLMP.”

Ahead of listing, the issue was at $24.90, up 8 cents on the day.

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