Preferred stocks remain weak; Two Harbors not yet free; Spark Energy plans deal

By Stephanie N. Rotondo

Seattle, March 8 – The preferred stock market continued to sell off in midweek trading.

A trader speculated that investors were sitting back, “trying to see what is cheap.”

The Wells Fargo Hybrid and Preferred Securities index waned 68 basis points. The U.S. iShares Preferred Stock index declined 76 bps.

One market source said the day’s dip was “roughly in line with Treasuries.”

Two Harbors Investment Corp.’s $125 million of 8.125% series A fixed-to-floating rate cumulative redeemable preferreds – a deal priced Tuesday – were not yet free to trade, a market source reported.

Sources said the issue was expected to free from the syndicate on Thursday.

A trader pegged the paper at $24.52 bid, $24.60 offered.

The deal came upsized from $75 million and tight to the 8.125% to 8.25% price talk.

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

Come early Wednesday, Spark Energy Inc. added another deal to the pipeline.

The Houston-based energy provider said it was selling $30 million of series A fixed-to-floating rate cumulative redeemable preferreds, with price talk in the 8.75% area.

According to one market source, the deal was launched at 8.75%, with $35 million of the preferreds expected to be sold.

RBC Capital Markets LLC and FBC Capital & Co. are the bookrunners.

The deal had not priced as of press time.

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