Election Day weighs on preferred stock trading; Citigroup active, weaker with market

By Stephanie N. Rotondo

Seattle, Nov. 8 – Preferred stock market trading activity dwindled significantly on Tuesday as U.S. voters went to the polls for the general election.

“Volume was pretty darn light,” a market source commented.

“There is nothing going on until after the election,” a trader said. In fact, the market could take the entire week to digest the results, he said.

“Unless Trump gets in,” he noted. “That could shake things up a bit.”

Consensus is that if Donald J. Trump, the Republican candidate, wins the U.S. presidency, there will be a flight to quality, the trader remarked.

“But it’s probably going to be a non-event though,” the trader added, pointing to the fact that most polls show Hillary Clinton, the Democratic candidate, winning.

“It depends on what happens tonight and tomorrow,” said another source. At this point, a Trump victory would be akin to the United Kingdom’s Brexit vote earlier in the year.

“It would be a surprise,” the source said. “That could throw things off, with people repositioning stuff just because it’s unexpected.”

The source also noted that Friday – Veterans Day – was a bank holiday and while the equity markets will be open, the bond markets will not be.

Even as liquidity waned, the preferred market was selling off, following in line with the broader markets’ early losses. However, the broader markets managed to end in positive territory, while preferreds remained soft.

The Wells Fargo Hybrid and Preferred Securities index finished down 19 basis points. The index was down 7 bps at mid-morning.

A source said the performance was “slightly better than the government bond market.”

As for the day’s dealings, Citigroup Inc. was moderately active – in fact, the most active name in the preferred stock space.

The 6.875% series H fixed-to-floating rate noncumulative preferreds (NYSE: CPK) waned 24 cents, closing at $27.24. The 7.125% series J fixed-to-floating rate noncumulative preferreds (NYSE: CPJ) fell a dime to $27.89.

Seaspan adrift

Seaspan Corp.’s preferreds were among the day’s biggest percentage decliners, just one day after the Hong Kong-based containership company announced a $150 million “at the market” preferred stock offering.

The 7.875% series H cumulative redeemable preferreds (NYSE: SSWPH) dropped $2.67, or 12.36%, to $18.89. The 8.2% series G cumulative redeemable preferreds (NYSE: SSWPG) lost $2.72, or 12.1%, to $19.76.

The 7.95% series D cumulative redeemable preferreds (NYSE: SSWPD) declined $2.26, or 10.44%, to $19.39, as the 8.25% series E cumulative redeemable preferreds (NYSE: SSWPE) declined $2.29, or 10.29%, to $19.97.

FBR Capital Markets & Co. is leading the offering. The proceeds will be used for general corporate purposes, including funding of acquisitions, funding capital expenditures on existing newbuild vessels and for debt repayments.

Seaspan could need the funds. The company said that it could be forced to repay earlier than expected the debt connected to three ships redelivered from Hanjin, unless it can find new charters for the vessels.

Seaspan said it has nearly $210 million owed under its credit facility tied to the ships.

The company said it was in talks to extend the timeline that the debt is owed.

© 2015 Prospect News.
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