Preferreds remain strong; Bank of America up on positive report; financials, Greek bank gain

By Stephanie N. Rotondo

Portland, Ore., Jan. 4 - The preferred stock market had another good day Wednesday, according to market sources.

"It was busy today, finally," a trader said. "Everything was moving up quite a bit.

"It's happy days for the first couple days of January," he added.

Another source said it was "definitely an up day." He saw the Wells Fargo Hybrid and Preferred Security index (NYSE: WHPSF) rise 1.16%, or about 29 cents on average for $25-par securities.

He noted that the index's closing price was the "highest close since Nov. 15."

Still, he said that he "wasn't sure what the fundamentals are that would justify that big a move." He remarked that the market was up 2.17% in the first two trading days of 2012 "on not what I would really call obviously substantive news."

One thing that was helping Wednesday's market was an article published by Bloomberg regarding Bank of America Corp.'s trust preferreds - and trust preferreds in general - and how those searching for yield are clamoring for such paper.

"That was positive for the market," the source said.

It was also positive for Bank of America and Countrywide Financial Corp., specifically.

Also heading higher were National Bank of Greece SA's preferreds. The gains came after the Greek bank said it is looking to buy back up to $2.5 billion of debt.

In the primary market, sources were buzzing about a new deal from Public Storage. One trader said the deal marked "the first time I've ever seen a deal come so early in the year," giving him hope that the new issue market might be busier this year.

However, several sources expressed misgivings about the deal's pricing.

Bank of America rises

Bloomberg published an article early Wednesday regarding Bank of America's trust preferreds and how their yields are tempting junk investors.

The article noted that some of the trust preferreds are yielding as high as 8.7% and given that most are typically redeemed at face value, the securities could provide decent reward.

While the news was positive for the preferred market in general, it also helped the Charlotte, N.C.-based bank's preferreds head into higher territory.

The 8.2% series H depositary shares (NYSE: BACPH) climbed up 63 cents, or 2.79%, to $23.22. The Merrill Lynch 8.625% series 8 noncumulative preferreds (NYSE: BMLPQ) meantime rose 70 cents, or 3.1%, to $23.28.

Countrywide, Bank of America's mortgage arm, was also firmer. The 7% trust preferreds (NYSE: CFCPB) gained 40 cents, or 1.94%, ending at $21.00.

In other Bank of America news, the bank announced Wednesday that it declared dividends on several series of preferreds, including the series Hs.

Financials mostly strong

Among other financials, ING Groep NV remained busy and better during the midweek session.

The 7.375% perpetual hybrid capital securities (NYSE: IDG) moved up 58 cents, or 3.1%, to $19.31, while the 8.5% perpetual hybrid capital securities (NYSE: IGK) closed 64 cents, or 2.89%, better at $22.77.

Barclays Bank plc was also strong, with the 8.125% series 5 noncumulative callable dollar preference shares (NYSE: BCSPD) ending up 44 cents, or 1.93%, at $23.24.

Citigroup Inc.'s 7.5% T-DECS tangible dividend enhanced common stock (NYCE: CPH), however, was bucking the overall trend. The $100-par issue fell 32 cents to $85.68.

Greek bank gains

National Bank of Greece's preferreds were also on the rise, spurred by news the company is looking to repurchase up to $2.5 billion of debt.

The 9% series A noncumulative preference shares (NYSE: NBGPA) closed up $1.49, or 47.3%, at $4.64.

The Greek bank said it will buy back bonds and hybrid securities in an attempt to boost its capital. The bank is looking to repurchase the equivalent of $2 billion of 3.875% covered bonds due 2016 as well as five series of preferreds issued in various denominations.

Holders of the covered bonds will receive 70% of face value, while preferred holders will get 45% of face value. That is below the original issue price, but it is above current trading levels.

The Athens-based bank is Greece's largest lender.

Year's first deal

Public Storage announced plans to issue series S cumulative preferred shares of beneficial interest.

According to one market source, price talk had originally been around 5.95%. "But it seems the deal is going well," he noted, as talk was later revised to 5.9%.

Additionally, the source said that the size was announced as $10 million, "but they'll grow that," he said. He estimated the deal would come between $30 million and $50 million.

He expects the deal to price Thursday.

At another shop, a trader said the deal "did very well in retail." However, he noted that "institutional buyers did not love the pricing," seeing 5.9% as "too rich."

He also opined that the deal would grow, hearing it could come as large as $55 million.

"I think it was very well subscribed," he said.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are the joint book-running managers.

Proceeds will be used to make investments in self-storage facilities and in entities that own self-storage facilities, to redeem preferred securities and for other general corporate purposes.

"They have a history of just continually rolling over preferreds," one source said, speculating that the company could take out the 6.6% series C cumulative preferreds (NYSE: PSAPC) or some other higher-coupon issue.

The Glendale, Calif.-based real estate investment trust intends to list the preferreds on the New York Stock Exchange.

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