Preferred stock market takes big hit; Costamare prices; Gladstone upsizes term preferreds

By Stephanie N. Rotondo

Phoenix, May 6 – The preferred stock market followed the decline of Treasuries on Wednesday, marking two consecutive days of major losses.

“All things considered, volume wasn’t as bad as it could have been,” a market source noted. “But everything was red, in a big way.”

The Wells Fargo Hybrid and Preferred Securities index finished the day down 1.16% – or “less than long Treasuries, but more than the 10-year,” the source said.

In the primary space, the pipeline was stacking up Wednesday, as Costamare Inc. priced $100 million of 8.75% series D cumulative redeemable preferreds.

A trader said price talk on the issue was in the 8.75% area. He saw the paper was offered at $24.75 in the early gray market.

Post-pricing, the preferreds were quoted at $24.50 bid, $24.60 offered.

“The fact that they could get [a non-rated deal] done in this market environment is kind of impressive,” a source said.

Morgan Stanley & Co. LLC, UBS Securities LLC, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Stifel Nicolaus & Co. Inc. ran the books.

Following the new issue announcement, the Athens, Greece-based containership company’s outstanding preferreds took a hit.

The 7.625% series B cumulative redeemable preferreds (NYSE: CMREPB) were off 88 cents, or 3.54%, at $24.00 a share. The 8.5% series C cumulative redeemable preferreds (NYSE: CMREPC) were down 64 cents, or 2.53%, at $24.70.

The market was meantime waiting for pricing on Gladstone Investment Corp.’s offering of series C cumulative term preferreds due 2022.

The deal was first announced Tuesday. Price talk was in the 6.5% area.

A trader said the deal was expected to price Wednesday afternoon, perhaps coming upsized at $35 million from $25 million.

Still, he saw few gray markets for the preferreds.

“The manager has been pretty good about keeping it out of the Street,” the trader said. “It should price and trade with a premium.

The deal did eventually price, coming well after the market officially closed. The McLean, Va.-based specialty finance company sold $35 million of the term preferreds at par to yield 6.5%, in line with talk.

Janney Montgomery Scott LLC is the bookrunner. Co-lead managers include J.J.B. Hilliard, W.L. Lyons, LLC, Wunderlich Securities, William Blair & Co. and Ladenburg Thalmann.

Maxim Group LLC is the co-manager.

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