SVB, Deutsche Bank paper declines; First Republic up; distressed retail soft, QVC down

By Cristal Cody

Tupelo, Miss., March 27 – The shakeup in the banking space continued as the week kicked off on news that First Citizens Bank will acquire Silicon Valley Bank out of receivership.

The deal does not include former holding company SVB Financial Group’s preferred stock or debt.

SVB’s paper dropped about 1 point to 3½ points on about $56 million of securities changing hands on Monday, a source said.

The 4% perpetual preferred securities were trading down more than 1 point on an 8 handle, while the 3½% notes due 2025 gave back 3 points.

Deutsche Bank AG’s notes were mixed in strong trading action on Monday after declining ahead of the weekend.

Deutsche Bank’s 7½% perpetual junior subordinated notes (Ba2/BB-) recovered 4 points after dropping about 9½ points on Friday.

The space has been under pressure since depositors fled Silicon Valley Bank and the government seized the bank on March 10.

First Republic Bank’s notes (B2/BB-/CCC+) rallied nearly 2 points to 6 points during the session.

Bank stocks also were higher.

The CBOE Volatility index fell 5.24% to 20.60.

The iShares iBoxx High Yield Corporate Bond ETF softened 18 cents to $73.42.

Distressed retail was heading higher early Monday with paper from Michaels Stores Inc. and QVC Inc. up 1½ points before softening over the session, sources said.

QVC’s paper was down 2½ points to more than 3 points following a downgrade from Fitch Ratings on Monday.

SVB notes lower

SVB Financial Group’s notes traded lower across its perpetual securities and bonds on Monday on about $56 million of secondary activity, a source said.

SVB’s 4% perpetual preferred securities were down more than 1 point on an 8 handle on $11.5 million of volume.

The bank’s 4.57% bonds due 2033 dropped 3 points to head out at 57 bid on $4 million of notes traded.

SVB’s 4¼% perpetual securities were trading Monday at 8 5/8 bid and yielding 50.9% with the issue seeing $5 million of volume.

The bank’s 3½% notes due 2025 also gave back 3 points to a quote of 61½ bid on $7.8 million of trading on Monday.

The Federal Deposit Insurance Corp. seized the company’s 17-branch Silicon Valley Bank in Santa Clara, Calif., on March 10.

The bank locations were expected to start operating Monday under the same name but as a division of First Citizens Bank.

Deutsche Bank notes mixed

Deutsche Bank’s 7½% perpetual junior subordinated notes (Ba2/BB-) recovered 4 points to trade at 71 bid on Monday on $13 million of secondary action, a source said.

The issue slid about 9½ points on Friday on more than $30 million of paper traded.

Deutsche Bank’s 4.789% perpetual notes (Ba2/BB-) fell more than 2 points over the session to a 59 handle in light trading after sliding more than 12 points on Friday.

The Frankfurt-based bank’s stock closed up about 5% at $9.79.

First Republic higher

First Republic Bank’s 4 3/8% subordinated notes due 2046 (B2/BB-/CCC+) rallied 6 points to 56¼ bid in light trading totaling $1.25 million on Monday, a source said.

The bank’s 4 5/8% subordinated notes due 2047 (B2/BB-/CCC+) traded nearly 2 points better at 52 3/8 bid on $5.5 million of activity.

On March 16, 11 major banks announced they would make $30 billion of deposits into First Republic to help shore up deposits.

First Republic Bank was cut to junk ratings this month by Moody’s Investors Service, S&P Global Ratings and Fitch.

The bank is based in San Francisco.

QVC, Qurate soften

Distressed retail remained under pressure heading into the close on Monday, a source said.

QVC’s 5¾% notes due 2027 (B2/B-) sank more than 4½ points to 40¼ bid on $5.5 million of trading.

The home shopping network’s 4 3/8% senior secured notes due 2028 (B2/B-) moved into the 30s over the session. The bonds were quoted off 2½ points at 38½ bid on $3 million of secondary supply.

QVC’s bonds went out Friday down about 2¾ points to 5 points.

Fitch said Monday that it lowered the ratings on QVC and parent West Chester, Pa.-based Qurate Retail Inc.

Qurate Retail’s 8½% senior notes due 2030 (Caa2/CCC-) dropped 3 7/8 points to 30 1/8 bid on $2.4 million of volume during the session, a source said.

Distressed index drops

S&P U.S. High Yield Corporate Distressed Bond index one-day returns sank on Friday to minus 1.25%.

Returns were down from 0.06% on Thursday, minus 0.2% on Wednesday, 0.15% on Tuesday and minus 0.57% at the prior week’s start.

Month-to-date return losses declined to minus 5.88% from minus 4.69% on Thursday, minus 4.74% midweek, minus 4.55% on Tuesday and minus 4.69% in the week’s first session.

Quarterly and year-to-date total returns fell to 2.7% on Friday from 3.99% on Thursday, 3.93% on Wednesday, 4.14% on Tuesday and 3.99% in the March 20 session.

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