First Republic Bank paper jumps in December; Signature Bank stages late-year rally; SVB dips

By Cristal Cody

Tupelo, Miss., Dec. 19 – Deeply distressed bank paper is mostly moving higher in strong secondary trading in December.

First Republic Bank’s heavily distressed notes continued to see a pickup in active supply Tuesday.

The 4 5/8% subordinated notes due 2047 racked up more than $21 million of trading volume with more than an hour still left in the session, a source said.

The issue was up ¾ point.

In addition, First Republic Bank’s 4 3/8% subordinated notes due 2046 jumped 1½ points on more than $21 million of volume reported Tuesday.

Other distressed bank paper also has rallied in December.

Signature Bank New York’s 4% subordinated notes due 2030 have climbed 8¼ points over the last two sessions and more than 20 points since the end of November. The issue was up 2½ points headed into the close Tuesday on more than $8 million of volume.

Both First Republic and Signature Bank were among three regional banks that collapsed earlier in the year and sparked a global banking crisis.

Paper from SVB Financial Group, which operated the third bank that collapsed, was lower in light trading over the day, a source said.

SVB’s 4.57% senior notes due 2033 fell ¼ point to 63¾ bid on $3 million of secondary activity Tuesday. The issue was about 1¼ points lower so far this week but has added more than 5 points in the past month.

The company’s 17-branch Silicon Valley Bank was shut and seized by the Federal Deposit Insurance Corp. in March, sending the paper’s once-high-grade trading levels to single digits.

While the primary markets were shutting down and trading desks starting to thin, market tone remained strong and stock indices all climbed Tuesday.

The S&P 500 index closed up 0.59%, while the Russell 2000 index finished the strongest at 2.02% higher.

The iShares iBoxx $ High Yield Corporate Bond ETF rose 22 cents, or 0.29%, to $77.20.

Measured market volatility also was ebbing. The CBOE Volatility Index declined 0.24% to 12.53, trending near its lowest level of the year.

First Republic higher

First Republic Bank’s 4 5/8% subordinated notes due 2047 were last seen Tuesday afternoon up ¾ point at 6 3/8 bid in heavy trading that totaled more than $21 million, a source reported.

The bonds traded as high as the 7¼ bid area over the day.

On Monday, the issue went out better at 5 5/8 bid on over $18 million of paper traded, up from 4¾ bid on Friday.

First Republic Bank’s paper has been strongly traded in December after seeing little activity in November.

The bank’s notes traded with a 50s handle in March but have been stuck below a 3-bid handle since May.

The bank’s 4 3/8% subordinated notes due 2046 also on Tuesday jumped 1½ points to 6½ bid by late afternoon. Trading was heavy with more than $21 million of volume reported.

The notes traded Monday about ½ point better on over $9 million of secondary activity.

The bank, among three that collapsed earlier this year, was closed and auctioned to JPMorgan Chase & Co. on May 2.

JPMorgan’s purchase of the bank did not include its corporate debt or preferred stock.

On March 31, First Republic reported $3.6 billion of preferred stock and $800 million of subordinated notes outstanding, according to a report from Moody’s Investors Service.

The former San Francisco-based bank faces a class action lawsuit from Swedish pension fund Alecta over investor losses.

Signature Bank climbs

Signature Bank’s 4% subordinated notes due 2030 rallied 2½ points over Tuesday’s session to 28½ bid on more than $8 million of secondary volume, a source said.

The issue traded as high as 29 bid over the session.

The notes shot up 5¾ points on Monday from where they went out Friday at 20¼ bid.

Signature Bank’s paper was moving over most of November in the 3 bid to 4 bid range. The issue finished November at 6½ bid.

The paper was seen in October as low as ½ bid.

The New York-based bank was closed in March by state regulators.

Distressed index edges up

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns edged up at the start of the week to 0.02% from minus 0.03% on Friday but remained down from 0.14% in the same session a week ago.

Month-to-date total returns rose Monday to 5.66% from 5.64% on Friday and well above the 2.04% level the same day a week earlier.

Year-to-date distressed total returns improved to 21.54% on Monday versus 21.52% on Friday and 17.37% in the week-ago session.

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