Recent preferred issues strengthen; JPMorgan weakens ahead of earnings; Magnum Hunter eyed

By Stephanie N. Rotondo

Phoenix, Oct. 13 – The preferred stock market finished firm on Tuesday, and recently priced issues were following suit.

A trader saw the Southern Co.’s $1 billion of 6.25% $25-par series 2015A junior subordinated notes due 2075 (NYSE: SOJA) “moving up nicely” to $25.45, though the issue ultimately settled at $25.43.

That was up 9 cents on the day. The notes were easily the most actively traded security among paying issues, with about 2.35 million notes changing hands.

The $875 million issue priced Oct. 1, and a $125 million greenshoe was fully exercised on Oct. 6.

Meanwhile, TravelCenters of America LLC’s $100 million of 8% $25-par senior notes due 2030 (NYSE: TANP) – a deal priced Sept. 30 – traded “over par,” according to the trader.

Those notes closed at par, up a nickel.

As for Targa Resources Partners LP’s $110 million of 9% series A fixed-to-floating rate cumulative redeemable perpetual preferred units, those moved up to $24.85 bid from a $24.80 to $24.85 context earlier in the session.

That deal priced Wednesday.

Away from recent issues, “everybody’s getting ready for earnings season with these banks,” a trader noted. There have been some stories circulating that the figures will not be stellar, he added.

JPMorgan Chase & Co. kicked off the third-quarter earnings season on Tuesday after the market closed. Ahead of the release, the bank’s preferreds were weaker.

Also in the secondary, Magnum Hunter Resources Corp.’s preferreds were paring losses from Monday’s session. The preferreds had dropped about 50% on Monday after it was announced late Friday that advisers had been hired to look into strategic alternatives and dividends on the preferreds were suspended.

JPMorgan earnings miss

JPMorgan Chase was the first bank to put out quarterly results on Tuesday. The report came after the market closed.

Prior to the release, the New York-based bank’s preferreds were trending down.

The 6.1% series AA noncumulative preferreds (NYSE: JPMPG) ended down a nickel at $25.20, while the 6.15% series BB noncumulative preferreds (NYSE: JPMPH) finished flat at $25.39.

For the quarter, JPMorgan posted adjusted earnings per share of $1.32 on revenue of $23.54 billion.

Revenue was off 6% year over year, and the figures missed expectations of $1.37 per share on revenue of $23.69 billion, according to analysts polled by Thomson Reuters.

On a non-adjusted basis, net profit was up over 20%.

Looking ahead, Wells Fargo & Co. and Bank of America Corp. are slated to bring earnings on Wednesday. Ahead of its report, Wells’ preferreds were on the decline.

The 5.85% series Q fixed-to-floating rate noncumulative perpetual preferreds (NYSE: WFCPQ) drifted down 14 cents, to $25.60. Both the 6% series V class A noncumulative preferreds (NYSE: WFCPV) and 6.625% series R fixed-to-floating rate noncumulative perpetual preferreds (NYSE: WFCPR) dipped 7 cents, to $25.68 and $27.63, respectively.

Magnum preferreds rebound

Magnum Hunter Resources’ preferreds regained some ground lost on Monday after the company said it had hired advisers and was nixing its preferred stock dividends.

The news came out Friday, and come Monday, the preferreds lost about 50% of their value.

In Tuesday trading, the 8% series D cumulative preferreds (NYSE: MHRPD) rose 26 cents, or 5.62%, to $4.89. The 10.25% series C cumulative preferreds (NYSE: MHRPC) moved up 26 cents, or 7.82%, to $3.60.

However, the company’s 9.75% notes due 2020 were “way down,” according to a trader, pegging the issue at 43 5/8.

That was down 6 points on the day, he said.

The bonds didn’t have a chance to react to the news on Monday, as the bond market was closed for Columbus Day.

On Friday, the Irving, Texas-based oil and gas company said it had hired PJT Capital LP as financial advisers and Kirkland & Ellis LLP as legal adviser to explore its strategic alternatives. The company also chose to stop making its monthly dividend payments on its preferred shares.

While the dividends are suspended, they will accumulate until the company pays the amount in full. Additionally, nixing the monthly payment will not impact the company’s revolving credit facility or its other debt agreements.

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