Preferreds strengthen; Wells Fargo Real Estate lists on NYSE; TravelCenters notes eyed

By Stephanie N. Rotondo

Phoenix, Dec. 8 – Preferred stocks closed higher Monday after gyrating a bit in early trading, vacillating between off a touch and essentially unchanged.

The Wells Fargo Hybrid and Preferred Securities index was down 1 basis point at mid-morning.

Wells Fargo Real Estate Investment Corp.’s $240 million issue of 6.375% series A cumulative perpetual preferreds experienced a quick turnaround, as the deal has already listed on the New York Stock Exchange.

The deal priced Thursday.

The ticker symbol is “WFEPA.”

The paper closed at $24.86, down from $24.90 at the open.

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

When declared, dividends will be paid on a quarterly basis. The preferreds become redeemable on or after Dec. 11, 2019 but can be redeemed earlier upon the occurrence of a tax or regulatory event, or if the company has to register as an investment company.

Meanwhile, TravelCenters of America LLC is said to be shopping around a $100 million offering of $25-par senior notes due 2029.

The company initially registered $57.5 million of the notes on Nov. 24. In a Dec. 4 regulatory filing, the company said it was selling $50 million of the notes. The amount was increased to $100 million on Monday.

Price talk is 8% to 8.125%, according to a trader.

The trader said the issue was trading in a $24.60 to $24.70 context in the early gray market.

Citigroup Global Markets Inc., Morgan Stanley, RBC Capital Markets and UBS Securities are the joint bookrunners. MLV & Co. LLC is the lead manager.

BB&T Capital Markets, Janney Montgomery Scott LLC and Oppenheimer & Co. are the co-managers.

Oil and gas weighed on

Away from new and recent deals, preferred securities linked to oil, natural gas and shipping were “getting hammered again,” a trader said.

Goodrich Petroleum Corp. was deemed “one of the most deserving of getting crushed,” as preferreds took a serious beating.

The trader noted that the paper has gone from trading around $21 to trading with a $6 to $7 handle in the past week.

“They are a true highly leveraged E&P,” he said. “It’s questionable whether they can survive long-term low oil prices.”

The 10% series C cumulative preferreds (NYSE: GDPPC) lost $1.66, or 20.15%, to $6.58, and the 9.75% series D cumulative preferreds (NYSE: GDPPD) fell $1.95, or 23.49%, to $6.35.

Other oil and gas preferreds were also taking hits during Monday trading.

Vanguard Natural Resources LLC’s 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) ended off $1.95, or 9.68%, at $18.20.

Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) closed the day down $2.22, or 11.77%, to $16.64.

And, Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) finished off $1.80, or 23.49%, at $18.77.

Those names have been under pressure as oil prices have plummeted.

West Texas Intermediate crude fell to the lowest level since July 2009, dropping $2.82, or 4.28%, to $63.02 per barrel. Brent crude meantime declined $2.86, or 4.14%, to $66.21.

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