Preferreds improve as Yellen sees rate hike this year; Qwest greenshoe partially exercised

By Stephanie N. Rotondo

Phoenix, Sept. 25 – Preferred stocks were moving up in early Friday trading as the market digested Federal Reserve chairman Janet Yellen’s speech late Thursday.

In the speech, Yellen indicated that the central bank had every intention of raising interest rates this year, given that economic indicators were improving.

Still, a trader said the speech resulted in “no follow through,” as the Fed chair “basically reiterated what [Stanley Fischer, vice chairman] said last week, that we will have liftoff this year.”

“There’s no new news,” the trader added. “It’s going in the right direction for them to do something. The question is when.”

The trader further opined that a rate hike would probably not come in October, though December seemed likely.

“It is what it is,” another market source said. “Personally, I hope they just go and get it over with instead of this Chinese water torture.”

Given that the increase is pushed back a little, that could give potential preferred stock issuers time to jump into the market and bring more new deals. The trader noted a story that was going around on Thursday that said “the only way for these fixed-income desks to make money these days is by new issues.”

In addition to Yellen’s comments, the markets also learned that Speaker of House John Boehner was resigning at the end of October.

The Wells Fargo Hybrid and Preferred Securities index rose 12 basis points by Friday’s bell.

Qwest deal adds

A $60 million greenshoe on Qwest Corp.’s $6.625% $25-par senior notes due 2055 (NYSE: CTZ) was partially exercised Friday, adding $10 million to the initial $400 million offering.

The notes finished the day firm, rising 12 cents to $24.99.

Meanwhile, the Monroe, La.-based telecommunications company’s 7.375% $25-par notes due 2051 (NYSE: CTQ) were also improving in active trading, closing up 3 cents to $25.72.

The new issue priced Sept. 10, coming upsized from $250 million and in line with price talk.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC were the joint bookrunning managers.

Goodrich exchanging debt

Goodrich Petroleum Corp. announced a privately negotiated debt swap on Friday. On the news, the company’s preferred stock was seen ending mixed.

The 10% series C cumulative preferreds (NYSE: GDPPC) closed off 8 cents, or 6.57%, to $1.14, while the 9.75% series D cumulative preferreds (NYSE: GDPPD) gained 7 cents, or 6.25%, ending at $1.19.

Under the terms of the exchange, Goodrich will swap nearly $160 million of its 8.875% senior notes due 2019 for $75 million of its 8.875% second-lien senior secured notes due 2018. Some participants in the exchange will also receive 10-year warrants good for up to 6 million shares of common stock.

The Houston-based oil and gas producer expects the deal will reduce its debt by $83.2 million and cut interest expenses by $7.4 million.

Standard & Poor’s jumped into action following the announcement, cutting its rating on the notes to D from CCC. That followed a recent corporate credit downgrade to SD after the company said it was exchanging some of its convertible debt for new convertible paper.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.