Preferreds start Q2 on a quiet note; UMH slips after add-on; PartnerRe exchange eyed

By Rebecca Melvin

New York, April 1 – The preferred stock market started the new quarter on a quiet note on Friday, as market players pored over economic data, including the March U.S. jobs report and manufacturing data.

“People are absorbing the numbers,” a market source said. Referring to the jobs report, he said, “the top number was better than expected, but the shocker on it was the lack of manufacturing jobs. So it is kind of a mixed signal for what the Fed might do.”

Given the idea that the economy is mixed, and with the expectation that the Federal Reserve will sit tight and not raise interest rates, it is likely that the preferred market will see an uptick in new issuance, at least at the beginning of the quarter, the market source said.

“With expectations of no rate raise, we should see stronger issuance,” the source said.

Meanwhile, in early trading action, UMH Properties Inc.’s 8% series B cumulative redeemable preferred shares were lower after the company priced a $50 million add-on of the shares at a premium for proceeds of $51 million.

The UMH series B shares were down $0.35, or 1.3%, at $25.85 at late morning. The UMH common shares were also down 1.3%, or 13 cents, at $9.79.

The preferred shares pared losses to close down $0.20, or 0.8%, to $26.00.

Elsewhere, market players considered the merits of PartnerRe Ltd.’s exchange offer in which it is offering new series G preferred shares with longer call protection in exchange for three series of existing preferreds.

“I’m looking at it. If you take on the new security, you get a longer no-call for five years. They are doing it for a merger,” one source said.

For one of the exchange entities, PartnerRe’s 5.875% series I preferreds, there is a call at about March 1, 2018, and instead the call goes out to 2021.

“You may benefit, but it may be that the only person who benefits is the broker,” the source said.

PartnerRe is a Pembroke, Bermuda, reinsurance company.

The overall economic picture was of most interest on the first day of the second quarter, a source said Friday. Economic data, including the March jobs report and manufacturing data, seemed supportive of the position that the Fed will be slower to raise rates than previously expected.

On Tuesday, Federal Reserve chairman Janet Yellen sent a signal that was pretty dovish and expectations were doused for an interest rate increase at the FOMC’s next meeting, anyway.

In her Tuesday speech, Yellen emphasized proceeding cautiously on rate raises, noting that global developments, especially in China, “pose ongoing risks.”

On Friday, data showed that the number of nonfarm jobs created in the U.S. economy in March was fairly robust, but other aspects of the report were not as bullish. Nonfarm payrolls rose by a seasonally adjusted 215,000 in March, the Labor Department reported. But unemployment edged up to 5% from 4.9%.

The unemployment rate ticked up even though there was a net gain in jobs because 396,000 people encouraged by job growth joined the labor force in March.

The Friday jobs report showed strong job growth in retail, construction and health care. But manufacturers lost 29,000 jobs, after losing 18,000 in February. And employment in mining and logging, a sector that includes oil and gas, fell by 12,000 after a 17,000 loss in February.

Also in economic data on Friday, U.S. manufacturing activity expanded in March for the first time since last summer.

Gabelli Equity Trust Inc.’s $80 million of 5.45% series J cumulative redeemable preferreds moved up to $25.10 early Friday compared to $25.02 on Thursday, a market source said.

Landmark Infrastructure Partners LP’s $20 million issue of 8% series A cumulative redeemable perpetual preferred units were unchanged at $24.60 at late morning.

© 2015 Prospect News.
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