Preferreds improve; American Realty dips as former CEO blamed for accounting mishap

By Stephanie N. Rotondo

Phoenix, Dec. 18 – Preferred stocks were firming up again Thursday as investors continued to react positively to the Federal Reserve statement that came out Wednesday.

One trader said it appeared that the central bank was in no hurry to raise rates, speculating that they could wait until 2016 to do so.

“That’s a positive, I believe,” he said.

The Wells Fargo Hybrid and Preferred Securities index closed the session up 22 basis points.

But not every name was benefitting from the day’s gains.

American Realty Capital Properties Inc.’s paper came in as the company’s ex-chairman, Nicholas Schorcsh, was accused of ordering the accounting changes that resulted in the company firing two of its executives.

Schorsch exited the company on Friday, according to a statement released on Monday. Two other top executives followed him. No definitive reason was given by the company for any of those departures.

Meanwhile, an early rebound in oil prices was pushing up Vanguard Natural Resources LLC’s preferred issues.

Though oil eventually ended weaker, the preferreds held their ground.

The 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) were up $1.61, or 8.35%, at $20.90. The 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) increased 67 cents, or 3.71%, to $18.71, and the 7.75% series C cumulative redeemable preferred units (Nasdaq: VNRCP) gained 64 cents, or 3.56%, to $18.63.

West Texas Intermediate crude fell $1.78, or 3.15%, to $54.69 per barrel. Brent crude dropped $1.65, or 2.7%, to $59.53.

American Realty takes a hit

American Realty Capital Properties’ preferreds continued to experience fallout from news out Monday regarding the departure of three top executives, including Schorsch, who was the company’s co-founder and former chief executive officer.

The company was in the headlines again on Thursday as a former executive alleged that it was Schorsch who ordered an accounting change that manipulated the real estate investment trust financial results.

The 6.7% series F cumulative redeemable preferreds (Nasdaq: ARCPP) lost 27 cents, or 1.25%, ending at $21.25. About 1.74 million shares changed hands during the session – quite a large amount, given that liquidity has been constrained all week as investors prepare for the coming holidays.

In a lawsuit filed on Thursday, Lisa P. McAlister – formerly the chief accounting officer and one of two executives that lost their jobs in the wake of the first announcement of the accounting irregularity – alleged that it was Schorsch who ordered her and Brian Block, former chief financial officer, to alter second-quarter results in order to cover up an error made in the first quarter.

McAlister claims she had concerns about following through with the orders, but that those concerns were ignored.

The New York-based company first announced the issue in late October and said that McAlister and Block had resigned.

McAlister is seeking $50 million in damages in her defamation suit, which was brought against Schorsch, CEO David Kay and the company itself.

On Monday, the company said Schorsch, Kay and Lisa Beeson, chief operating officer, had resigned their positions.

TravelCenters gets symbol

TravelCenters of America LLC’s $120 million of 8% $25-par notes due 2029 was assigned a temporary reporting symbol on Thursday, according to a trader.

The deal priced Dec. 9. The temporary symbol is “TANO.”

A trader said he last saw the issue trading at $25.19, though he did not think that was necessarily accurate. He added that paper was being offered at $24.70.

Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, RBC Capital Markets LLC and UBS Securities LLC were the joint bookrunners.

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