Recapping Recent Income Issue News
By: Tim McPartland,
Recapping the important news in income securities in the last week. New issues, bankruptcies and major movers.
New Issues in the last week of Preferred Stocks and Exchange Traded Debt (ETD)
The last week or two have been relatively quiet in the new issue arena for preferreds and Baby Bonds (also known as ETDs or exchange traded debt).
There was only 1 new issue that was issued and that was a cumulative preferred stock issued by Medical Transaction Billing Company. This is a 11% $25 issue that was issued with just 204,000 shares sold. As should be obvious to all there is plenty of risk in this issue (any company issuing shares at 11% has plenty of risk).
The 3 new issues that hit the market 2 weeks ago have traded as follows—
Southern Company 6.25% Subordinated Notes closed last week at $26.08 continuing a very solid performance. Investors continue to favor quality issues in this time of uncertainty of global economics.
Targa Resources Partners LP 9% fixed to floating preferred issue closed last week at $22.56. No doubt that the action in this issue reflects the terrible fundamentals in the energy arena.
TravelCenters of America 8% Senior Notes are trading at $25.15. The pricing reflects the fairly neutral stance of investors–we think this is a nice issue to hold (of course we never recommend issues as we do not know your circumstance).
Income Issue News Items
There has been quite a bit of action in the income issue sector in the last couple of weeks.
Little energy company EnerJex Resources suspended dividends on their Series A cumulative, redeemable preferred issue (ticker:ENRJ-P) These shares are now trading at $1.30 and we would be surprised to ever see these shares pay a dividend.
Natural gas producer Escalera Resources officially filed for bankruptcy. The company has 1 series of preferred stock outstanding which will be a total loss.
Magnum Hunter Resources (ticker:MHRC) had their shares (common shares and 3 preferred issues) delisted from the NYSE and now with the common at 3 cents we believe the company will be forced into bankruptcy. Contrary to some beliefs out there we do not believe any investment in preferreds will be recovered–total loss.
Timber REITs Weyerhaeuser (ticker:WY) and Plum Creek (ticker:PCL) announced that they would merge creating a $23 billion company.
Red Lion Hotels announced that they would redeem their 9.5% trust preferred shares on 12/15/2015. We have expected this redemption for years as they became eligible for redemption way back in 2009.
Mixed use REIT Hudson Pacific (ticker:HPP) is calling for redemption of their 8.375% cumulative redeemable preferred shares on 12/10/2015–the 1st date they are eligible for redemption.
Economic News for the Coming Week
France—the economic fallout is yet to be determined–obviously it will not be helpful if consumers in Europe and/or North America pull in their spending horns. Odds are we will see some flight to safety in treasuries.
This week doesn’t have any singular economic release that will be market moving.
Monday we see the release of the Empire State Manufacturing Survey. This survey has shown a great deal of manufacturing weakness and it is expected to continue.
On Tuesday we have Consumer Prices (CPI) , Industrial Production and Housing Market Index. The CPI has shown little upward pressure in recent months and this is likely to continue given the continuation of soft energy prices. Industrial Production has been fairly soft and again it is expected to continue this trend. The Housing Market Index has been firm for 3-4 months and the expectation is that it will continue–we question that there is really much strength here and we believe it will tail off soon.
Wednesday has another housing number with Housing Starts. Multi Family construction has been propping this number up as single family starts are soft. There has been a huge amount of multi family construction in the last couple of years and one has to wonder how long this can continue.
Thursday has Jobless Claims. This has been stuck at 260,000 to 280,000 for many months and likely will continue. Leading indicators will be released on Thursday and this has been soft and is expected to bounce.
All in all there are many releases of information, but none will be market movers.