Morning Commentary: Preferreds edge upward; Escalera halts dividend, brings down energy names

By Stephanie N. Rotondo

Phoenix, March 10 – Preferred stocks were ticking up Tuesday as long Treasuries improved due to a strong dollar, according to a trader.

The Wells Fargo Hybrid and Preferred Securities index was up 10 basis points.

The trader also noted that oil was weakening. That, combined with news that Escalera Resources Co. had suspended its dividend, was pressuring other oil names.

Escalera’s 9.25% series A cumulative preferreds (Nasdaq: ESCRP) were off $7.83, or 44.31%, at $9.84 at mid-morning.

“People are selling off other issues in fear” they may follow suit, the trader said.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were off 98.2 cents, or 4.43%, at $21.198. Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) had dipped 92 cents, or 4.01%, at $22.03.

Escalera said it was halting the dividend in order to preserve its cash. If the company fails to pay the dividend for six consecutive or non-consecutive periods, the dividend rate goes up to 12% until the accumulated dividends are paid in full.

The primary space was meantime still quiet as of early trading, though a trader said he was “hearing of a possible deal today, but I’m not seeing it yet.”

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