Preferreds lose early momentum, end softer; Southern Co. taps market; TravelCenters frees

By Stephanie N. Rotondo

Phoenix, Oct. 1 – The preferred stock market was attempting to move up in the first trading session of the month, but as has been the case all week, the market gave back early gains to end weaker.

The Wells Fargo Hybrid and Preferred Securities index closed down 7 basis points, though it was up 8 bps at mid-morning.

“The market was pretty much sliding” until early afternoon, a market source said, “and then it stabilized.”

Another new issue was added to the calendar as well, as the Southern Co. said it planned to sell $250 million of $25-par series 2015A junior subordinated notes due 2075. The deal came massively upsized at $875 million at par to yield 6.25%.

Price talk was 6.25% to 6.375%.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunners. Co-managers are Barclays, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

A trader saw a less-23-cent bid, less-15-cent offer gray market early in the day.

“It’s being issued off of the Southern Co. instead of their subs, which is a little different than usual,” the trader said ahead of the pricing. “It looks like a good deal as long as they don’t tweak the price talk down too much.”

Another source said the issue ended “probably a couple cents” lower than levels seen earlier in the day.

Meanwhile, TravelCenters of America LLC’s $100 million of 8% $25-par senior notes due 2030 – a deal priced Wednesday – was seen offered at $24.60 and closing with a volume weighted average price of $24.63.

The issue freed to trade around midday.

Citigroup, Morgan Stanley, RBC Capital Markets LLC and UBS Securities ran the books.

Goodrich pops

As for the secondary market, a trader said there was not “much going on,” though he noted that “some of these beat up oil names are getting a little pop” as crude oil prices rallied nearly 4% in early trading.

And while oil prices eventually came in to end modestly lower – West Texas Intermediate crude declined 14 cents to $44.95 per barrel for November delivery – the commodity-linked preferreds fared rather well.

In that space, Goodrich Petroleum Corp.’s preferreds were the day’s biggest percentage gainers, by far – though the shares were trading sub-$1.00 prior to the day’s rally.

The 9.75% series D cumulative preferreds (NYSE: GDPPD) gained 80 cents in trading, doubling its price to $1.60. The 10% series C cumulative preferreds (NYSE: GDPPC) rose 96 cents, or 120%, to $1.76.

Dividends on both of those issues were suspended on Aug. 28.

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