DDR, Aegon eye redemptions, trade lower; BofA miscalculates reserves, preferreds hold in

By Stephanie N. Rotondo

Phoenix, April 28 - Preferred stocks were getting off to a rough start on Monday, as the Wells Fargo Hybrid and Preferred Securities index dipped 9 basis points as of mid-morning.

However, the index rebounded by the end of business to close up 11 bps.

"The market was kind of all over the place," one market source said, noting that despite the gyrations, there were not "dramatic" moves.

A trader also noted that there were no new deals announced, though he said he was expecting some this week.

"Most people are thinking that banks are free game to issue now," another source said.

Redemptions were the focus of the session, as DDR Corp. called its remaining $55 million of 7.375% class H cumulative redeemable preferreds and Aegon NV said it was redeeming all of its 7.25% perpetual capital securities.

Elsewhere in the secondary, Bank of America Corp.'s "preferreds were fine, its common was down," a trader said, as the bank said that it would have to halt a stock buyback and dividend increase due to a miscalculation of its capital reserves.

DDR, Aegon to call shares

Beachwood, Ohio-based real estate investment trust DDR announced Monday that it was calling its remaining $55 million 7.375% class H cumulative redeemable preferreds.

The DDR preferreds (NYSE: DDRPH) were off just a penny on the news, trading around $25.31.

The 2.2 million preferreds will be called on May 30. On April 2, the company called $7.5 million of the preferreds for May 6.

Insurance provider Aegon also announced a call of its 7.25 perpetual capital securities during the session. The Hague, the Netherlands-based company said the redemption "supports the company's target to maintain a fixed charge cover within a range of 6 to 8 times." When combined with a recent new euro-denominated deal, the move is expected to increase the fixed charge cover 0.7 times on an annualized basis.

On the news, Aegon's (NYSE: AEF) preferreds were down over 1%, losing 33 cents to trade at $25.41.

BofA finds reserve error

Bank of America's preferreds shook off news that the Charlotte, N.C.-based bank would have to nix plans for a share buyback and dividend increase due to a calculation error that inflated its capital reserve levels.

"Most of their [preferred] stuff was up," a market source said. "[The news] was more of an equity issue."

Still, he conceded that he was "expecting it to be off more than it was."

The floating-rate series 4 noncumulative preferreds (NYSE: BMLPJ) rose a nickel to $22.20, while the 6.204% series D noncumulative preferreds (NYSE: BACPD) gained 6 cents to close at $24.96.

The latest round of stress tests earlier this year seemed to be a breeze for BofA, and the Federal Reserve allowed the company to up its common stock dividend for the first time since the financial crisis. However, the bank discovered an accounting error regarding structured notes taken over when it merged with Merrill Lynch in 2009. That means the error has been on the books for the last four years.

BofA alerted the Fed, which is now requiring the bank to resubmit all of its information and a new capital plan. The bank warned that the new plan may include a lower share repurchase or dividend increase.

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