Preferreds recoup early losses; Capital One pressured; Customers’ deal frees to trade

By Stephanie N. Rotondo

Phoenix, May 12 – The preferred stock market was softening in early Tuesday trading but managed to end the day with a positive tone.

The Wells Fargo Hybrid and Preferred Securities index closed 19 basis points higher on the day. The index was down 8 bps at mid-morning.

The early weakness did put some pressure on new deals.

A trader said Capital One Financial Corp.’s $1 billion of 5.55% series E fixed-to-floating rate noncumulative preferreds – a deal priced Monday – were bid for at 98.5 early in the session, though he attributed the weakness in the issue to a lower Treasury market. He speculated that as that market inched up, the new deal could trade in a 99 to par context.

The new $1,000-par paper came via Barclays, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Wells Fargo Securities LLC and Capital One Securities Inc.

Meanwhile, Customers Bancorp Inc.’s $50 million of 7% series C fixed-to-floating rate noncumulative preferreds – a $25-par deal that also came Monday – freed to trade at 10:30 a.m. ET, according to a trader.

Though he had yet to see any markets, the trader opined that the shares would soon pop up to par.

Morgan Stanley and UBS Securities LLC ran the books.

As for new business, Eagle Point Credit Co. Inc. announced a $35 million offering of series A term preferred stock due 2022.

A trader said he had not seen any details on the deal, which was coming through Deutsche Bank Securities Inc. and Keefe Bruyette & Woods Inc.

Verizon rises on merger

Verizon Communications Inc.’s 5.9% $25-par notes due 2054 (NYSE: VZA) were up nearly 1% in Tuesday trading as the telecommunications company announced it was buying AOL Inc.

The notes closed up 24 cents at $26.09.

Verizon is making a play for AOL in order to beef up its mobile video and advertising capabilities. The company is paying a total of $4.4 billion for AOL, which works out to $50 per common share. That equaled a 17.4% premium over Monday’s closing share price.

AOL’s Tim Armstrong will retain his post as chief executive officer of the unit. So far, Verizon has not indicated any plans to spin off units such as Huffington Post.

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