Midday Commentary: BNY Mellon to bring new deal, talked at 5.25%; Public Storage frees up

By Stephanie N. Rotondo

Phoenix, Sept. 12 - Rumors of a possible bank new issue proved true Wednesday when the Bank of New York Mellon Corp. announced an offering of series C noncumulative perpetual preferreds.

Price talk is around 5.25%, according to a trader.

"I'd rather own them than State Street at 5.25%," the trader said. When asked why, he said BNY Mellon had "a better model" and was holding "a lot of money just as a clearinghouse." He said the company posed a lower risk and that it was "easier to quantify return on capital."

He saw the proposed issue trading at less 15 cents bid, less a dime offered in the gray market.

Liquidation preference is $100,000 per share.

The company will be able to redeem the preferred shares on or after a certain date, or within 90 days of a regulatory capital treatment event.

BNY Mellon will apply to list the preferreds on the New York Stock Exchange under the ticker symbol "BKPC."

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and BNY Mellon Capital Markets LLC are the joint bookrunners.

Proceeds will be used for general corporate purposes. Some of the proceeds might be contributed to subsidiaries to be used for general corporate purposes.

Meanwhile, Public Storage's new $450 million of 5.375% series V cumulative perpetual preferred shares of beneficial interest freed to trade Wednesday.

The deal priced Tuesday and came at the low end of talk.

A trader saw the paper trading around $24.75 at midday.

The joint bookrunners are Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC. Co-manager is RBC Capital Markets LLC.

The preferreds are redeemable on or after Sept. 30, 2017.

The Glendale, Calif.-based real estate investment trust will apply to list the new series of preferreds on the New York Stock Exchange under the ticker symbol "PSAPV."

Proceeds will be used to redeem all outstanding 6.45% series X cumulative preferreds and all 6.45% series F cumulative preferreds. Any remaining funds will be used for general corporate purposes, which might include investments in self-storage facilities and the redemption of other preferred issues.

Among other recent deals, Annaly Capital Management Inc.'s 7.5% series D preferreds were "hanging right around par," according to a trader.

That deal priced Sept. 6.

"Everything is doing fine, but kinda sleepy," a trader said. He noted that the market is waiting to see if the Federal Reserve would in fact launch another round of quantitative easing. It is widely expected that they will, but the question is how big it will be, how it will be done and what sort of language is used.

Additionally, with the recent strength in yields, the trader speculated the trend could continue regardless.

"The creep up in yields might continue to happen even with QE3," he said.

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