Preferreds improve; Southern Co.’s new 6.25% $25-par notes free to trade; Magnum sinks

By Stephanie N. Rotondo

Phoenix, Oct. 5 – The preferred stock market was moving up in Monday trading as investors shook off concerns about the Federal Reserve’s looming interest rate increase.

The Wells Fargo Hybrid and Preferred Securities index closed up 44 basis points. The index was up 19 bps at mid-morning.

A market source said it was “a steady climb up” all throughout the session, though, based on the index’s performance, the market came in a touch by the bell.

In September, the central bank chose to keep rates steady amid global economic concerns. Since then, the markets have been volatile as uncertainty reigned. But a weak jobs report last week – which showed a second month of less-than-expected job growth – has many speculating that the rate hike won’t occur until 2016.

As such, uncertainty has given way to confidence that rates will stay steady for longer.

Meanwhile, a trader said the Southern Co.’s $875 million of 6.25% $25-par series 2015A junior subordinated notes due 2075 – a deal that came Thursday – freed to trade early in Monday’s session.

He pegged the notes at $24.87 bid, $24.90 offered.

Another source said the issue closed at $25.42, though he deemed that price “excessive.” Instead, he said the volume weighted average price was a more accurate read at $24.96.

The deal came massively upsized from $250 million and at the tight end of 6.25% to 6.375% price talk.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC led the offering.

Also from last week’s business, TravelCenters of America LLC’s $100 million of 8% $25-par senior notes due 2030 – a deal priced Wednesday – were seen bid for at $24.65 early in the session and ending at $24.70.

Citigroup Global Markets Inc., Morgan Stanley, RBC Capital Markets LLC and UBS Securities ran those books.

Magnum Hunter retreats

Magnum Hunter Resources Corp.’s 8% series D cumulative preferreds (NYSE: MHRPD) were weaker Monday despite a gain in oil as well as a boost in the company’s common stock.

The preferreds finished at $7.66, down 32 cents, or 4.01%.

One distressed bond trader noted that the 9.75% notes due 2020 were also soft, falling a quarter-point to 43¾.

However, the equity (NYSE: MHR) improved by 4.5 cents, or 9.14%, to close at 53.95 cents.

The Irving, Texas-based oil and gas company’s preferreds – as well as its bonds – failed to improve even as domestic crude prices gained 1.67% on the day. The price gain was attributed in part to a gain in gasoline prices, as well as a new willingness on Russia’s part to engage with OPEC and non-OPEC producers to deal with the current volatility in the oil markets.

But as for Magnum Hunter itself, it could be facing a takeover attempt.

Last week, it was reported that Atlas Consulting, an Austin-based energy consulting company, has lined up enough shareholder support to attempt a takeover. Dallas Salazar, CEO of the firm, said there is one creditor who is willing to purchase a large portion of the company.

Salazar also remarked that he thought the company had attractive assets but was dealing with an over-leveraged balance sheet.

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