Morning Commentary: Legg Mason offers $25-par notes; Bank of America pricing $1,000-par preferreds

By Stephanie N. Rotondo

Seattle, March 7 – The preferred stock market’s primary space was kicking the week off with not one, but two new issues.

In the $25-par space, Legg Mason Inc. said it was selling a minimum of $150 million junior subordinated notes due 2056.

Price talk is 6.5% to 6.625%, a market source said.

A trader said he saw a less 40-cent bid in the gray market for the new notes. However, he didn’t expect the deal to trade “too crazy,” as the issue is not QDI/DRD eligible.

“People are looking for the DRD,” he said, referring to the Dividends Received Deduction allowed for corporate tax purposes.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC are running the books.

Meanwhile, in the $1,000-par arena, Bank of America Corp. said it was planning to sell series DD fixed-to-floating rate noncumulative perpetual preferred stock.

Price talk is around 6.625%, a source said.

A trader said he hadn’t seen any quotes for the deal, which is typical with $1,000-par issues.

BofA Merrill Lynch is leading that deal.

As the primary has picked up in the last week, a trader commented that a new report in Barron’s over the weekend indicated that utilities might soon be tapping the markets. With many banks slated to issue redeterminations over credit facilities in April, the sector could be looking to “start raising a lot of cash.”

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