Sotherly nears par post-pricing; National Storage, Seaspan free to trade; recent deals hit NYSE

By Stephanie N. Rotondo

Seattle, Oct. 4 – Recently priced issues were being eyed in the preferred stock market on Wednesday.

Sotherly Hotels Inc.’s $30 million of 7.875% series C cumulative redeemable preferreds – a deal priced late Tuesday – finished Wednesday at $24.92 bid, $24.96 offered.

The issue was seen quoted wide in early dealings, with a trader pegging the paper at $24.70 bid, $24.95 offered.

The deal came in the middle of the 7.75% to 8% price talk. It was first announced on Monday.

Sandler O’Neill + Partners LP and Janney Montgomery Scott LLC ran the books.

Dividends will be paid quarterly. The preferreds become redeemable on Oct. 15, 2022, or upon a change of control, at par plus accrued dividends.

The new issue is expected to list on the Nasdaq Global Select Market under the ticker symbol “SOHOO.”

Proceeds will be contributed to the operating partnership, Sotherly Hotels LP. The partnership will then use funds to redeem in full the 7% $25-par senior notes due 2019 (Nasdaq: SOHOM). Any remaining proceeds will be used for general corporate purposes, including potential future acquisitions.

Also from Tuesday’s business, National Storage Affiliates Trust’s $150 million of 6% series A cumulative redeemable preferreds freed to trade just before lunch, according to a market source.

The issue was assigned a temporary ticker symbol, “NSAFP.”

The paper ended the session at $24.90. The preferreds were seen at $24.88 bid, $24.92 offered at mid-morning.

Pricing came at the tight end of the 6% to 6.125% talk.

Wells Fargo Securities LLC, Morgan Stanley & Co. LLC and Jefferies LLC were the joint bookrunners.

The shares are redeemable on or after Oct. 11, 2022 at par plus accrued dividends. The issue can also be redeemed upon a change of control.

The new securities will list on the New York Stock Exchange under the ticker symbol “NSAPrA.”

The Greenwood Village, Colo.-based real estate investment trust will contribute proceeds to its operating partnership in exchange for series A preferred units. The operating partnership will then use the funds to repay borrowings outstanding under a revolving credit facility.

Seaspan Corp.’s $80 million of 7.125% $25-par notes due 2027 also freed to trade toward midday, a source reported.

At the close, another source pegged the notes at in a $24.55 to $24.60 context. Earlier in the day, the notes had moved up, trading in a $24.65 to $24.75 context, a trader said.

A market source had placed the notes at $24.55 at Tuesday’s close.

The offering priced on Monday. Initial price talk was 7.125% to 7.25%.

RBC Capital Markets LLC and Stifel Nicolaus & Co. Inc. led the deal.

Recent issues list

There were a flurry of new listings on the New York Stock Exchange on Wednesday.

Horizon Technology Finance Corp.’s $32.5 million of 6.25% $25-par notes due 2022 began trading under the ticker symbol “HTFA.”

The issue closed the day at $25.44, off 6 cents, albeit in limited trading.

The notes priced Sept. 26 on top of the 6.25% price talk. The deal size was initially talked at $30 million.

Keefe Bruyette & Woods Inc. was the bookrunner.

Also admitted to the NYSE were Federal Realty Investment Trust’s $150 million of 5% series C cumulative redeemable preferred stock.

The ticker symbol is “FRTPrC.”

The preferreds were seen trading up a dime to $24.70.

The deal came Sept. 25, upsized from an expected $100 million.

Price talk was in the 5.125% area.

BofA Merrill Lynch, UBS Securities LLC and Wells Fargo were the joint bookrunners.

Investors Real Estate Trust’s $100 million of 6.625% series C cumulative redeemable preferred shares listed under the symbol “IRETPrC.”

That issue finished at $24.75, up 20 cents.

The deal priced Sept. 26 in the middle of the 6.5% to 6.75% price talk.

BMO Capital Markets and Raymond James & Associates Inc. were the joint bookrunners.

The case for GSE capital

Fannie Mae and Freddie Mac preferreds were trading mostly lower in the midweek session, following comments made by Mel Watt, head of the Federal Housing Finance Agency, on Tuesday.

Fannie’s 8.25% series S fixed-to-floating-rate noncumulative preferreds (OTCBB: FNMAS) were off 4 cents at $6.95, on over 1.84 million shares traded. The variable-rate series P noncumulative preferreds (OTCBB: FNMAH) were also weaker, falling 12 cents, or 2.15%, to $5.46.

About 1.32 million of those preferreds changed hands.

Fannie’s variable-rate series O noncumulative preferreds (OTCBB: FNMFN) meantime declined a nickel to $11.00. Nearly 694,000 of those preferreds traded.

Freddie’s 8.375% fixed-to-floating-rate noncumulative preferreds (OTCBB: FMCKJ), however, managed to trade up, adding 7 cents, or 1.02%, to close at $6.90.

About 962,000 of those preferreds were traded.

On Tuesday, FHFA head Watt reiterated to the House Financial Services Committee that the government-sponsored entities need to be allowed to retain capital in order to avoid another taxpayer bailout.

Under the current agreement with the Treasury Department, Fannie and Freddie must send a majority of their profits to the government by way of a dividend payment. The agencies’ capital cushion has also been steadily decreased, with it set to hit zero in 2018.

“Like any business, the enterprises need some kind of buffer to shield against short-term operating losses,” Watt said in his testimony. “In fact, it is especially irresponsible for the enterprises not to have such a limited buffer because a loss in any quarter would result in an additional draw of taxpayer support and reduce the fixed dollar commitment the Treasury Department has made to support the enterprises.”

Furthermore, Watt urged Congress to act faster on housing finance reform.

In a commentary posted on realclearmarkets.com, James C. Miller III – a former director of the U.S. Office of Management and Budget and former chairman of the Federal Trade Commission – said that Watt could move to stop Fannie and Freddie’s quarterly payments, thereby allowing them to rebuild their coffers. Doing so would not prohibit further action on reform, he said, but would instead hedge the bet, so to speak.

“In the short term, the GSEs would be liberated from uncertainty and could go about their important mission of providing liquidity in the home lending market,” Miller wrote. “In time, Congress and the [Trump] administration could develop new ways to spur more competition in securitizing mortgages and other changes they see fit to reduce government’s role and bring more private capital into the home finance system.”

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