Compass Diversified sells $100 million in preferreds; preferreds up; Monmouth, Morgan Stanley active

By Abigail W. Adams

Portland, Me., March 6 – The primary market in the preferreds space is two for two this week with the pricing of a new preferred stock offering after the market close Tuesday and a baby bond deal pricing after the market close Monday.

Compass Diversified Holdings priced $100 million, or 4 million shares, of $25-par series B fixed-to-floating rate cumulative preferred shares after the market close Tuesday with a dividend of 7.875%, according to an FWP filing with the Securities and Exchange Commission.

It is the first preferred stock deal to price in March and the second new deal of the week. CMS Energy priced $200 million of 5.625% $25-par junior subordinated notes (Baa2/BBB-/BB+) due March 15, 2078, according to an FWP filed with the SEC.

The preferreds market saw gains on Tuesday with both market indicators up at the market close. The Wells Fargo Hybrid & Preferred Securities Financial index was up 0.05% and the U.S. iShares Preferred Stock ETF was up 0.24%.

Trading volume was light in the preferreds space on Tuesday with the usual high-volume trading names relatively quiet.

However, Monmouth Real Estate Investment Corp.’s 6.125% series C cumulative redeemable preferred stock saw more than 10x their average trading volume on Tuesday.

Morgan Stanley’s depositary shares representing 5.85% series K fixed-to-floating rate non-cumulative preferred stock also saw above average trading volume on Tuesday.

Compass’ deal

Compass priced $100 million, or 4 million shares, of $25-par series B fixed-to-floating rate cumulative preferred shares after the market close Tuesday with a dividend of 7.875%, according to an FWP filing with the Securities and Exchange Commission.

BofA Merrill Lynch, Morgan Stanley & Co. LLC and UBS Securities LLC are the bookrunners for the offering, which carries a greenshoe of $15 million, or 600,000 shares.

The series B preferreds will have a fixed dividend of 7.875% until April 30, 2028 when it will switch to a floating rate of Libor plus 498.5 basis points.

Net proceeds are expected to be $96.85 million. Proceeds will be used for the repayment of debt and for general corporate purposes.

The preferred shares will be listed for trade on the New York Stock Exchange under the ticker “CODIPrB.”

High volume

On a low volume trading in the preferreds space, Monmouth’s 6.125% series C preferred stock was active.

The series C preferred stock traded down to $24.45, a decrease of 5 cents, or 0.20% at the market close Tuesday.

The preferred stock saw nearly 10x their average trading volume with more than 243,000 shares in play on Tuesday versus the three-month average of 22,500.

While Monmouth’s preferreds were down in high volume trading, Morgan Stanley’s depositary shares representing the company’s 5.85% series K preferred stock were up. The depositary shares closed Tuesday at $26.71, an increase of 12 cents, or 0.45%.

With more than 284,000 shares in play on Tuesday, the depositary shares saw more than double their average trading volume.

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