Customers Bancorp sells $75 million preferreds; Entergy Mississippi bonds free to trade

By Stephanie N. Rotondo

Seattle, Sept. 9 – The preferred stock primary market showed no signs of letting up on Friday, as Customers Bancorp Inc. sold series F fixed-to-floating rate noncumulative preferred stock.

At an initially expected amount of $50 million, the issue was the smallest of the week. However, a trader still deemed the offering as “interesting.”

“We haven’t seen [a fixed-to-floating rate issue] that’s $25-par in awhile,” he noted. “So that should be snapped up by institutional buyers.”

The Wyomissing, Pa.-based bank holding company sold $75 million of the preferreds at par to yield 6%. Price talk on the non-rated deal was 6% to 6.125%. Morgan Stanley & Co. LLC and UBS Securities LLC are running the books.

A market source had placed the issue at $24.90 bid in the gray market.

The rate will be fixed until Dec. 15, 2021, at which point it will float at Libor plus 476.2 basis points.

The preferreds become redeemable on or after Dec. 15, 2021 or in whole within 90 days of a regulatory capital treatment event at par plus accrued dividends.

From Thursday’s business, Entergy Mississippi Inc.’s $260 million of 4.9% $25-par first mortgage bonds due 2066 had freed to trade as of mid-morning, a trader reported.

The trader saw the issue trading “around $24.90.”

Meanwhile, Associated Banc-Corp’s $100 million of 5.375% series D noncumulative preferreds – a deal priced Wednesday – gained momentum in early trading but declined a bit by the bell.

One trader pegged the paper at $25.25 bid, $25.40 offered at mid-morning. At the close, however, a market source saw the issue at $25.23.

And from Tuesday, Monmouth Real Estate Investment Corp.’s $135 million of 6.125% series C cumulative redeemable preferreds were seen offered at par in early trading, though a source saw the preferreds closing at $24.97.

KeyCorp’s $525 million of 5% $1,000-par series D fixed-to-floating rate noncumulative perpetual preferreds – another deal from Tuesday – were meantime seen drifting below par to 99.875.

Market sources were also reporting that the calendar was expected to stay active next week.

“I’m hearing two big deals for next week,” one trader said, though he did not have any specifics.

Secondary loses steam

As for the secondary space, it experienced a hefty decline during the final trading session of the week.

The Wells Fargo Hybrid and Preferred Securities index dropped 123 basis points for the day. By comparison, the Dow Jones industrial average declined 213 bps.

Wells Fargo & Co.’s preferreds were particularly battered, making the list of the day’s largest percentage losers.

The 6% class A series T noncumulative preferreds (NYSE: WFCPT) declined 64 cents, or 2.35%, to $26.64, while the 6% class A series V noncumulative preferreds (NYSE: WFCPV) lost 73 cents, or 2.63%, to end at $27.00.

The 5.5% class A series X noncumulative preferreds (NYSE: WFCPX) finished 78 cents, or 2.94%, weaker at $25.72.

In addition to it being a heavy day, Wells Fargo had some negative headlines of its own to contend with.

On Thursday, it was announced that the San Francisco-based bank had agreed to pay $185 million in fines, plus restitution to certain customers, after it was discovered that bank employees had been opening up fraudulent accounts.

About 5,300 employees were terminated as a result of the findings.

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