BB&T announces plans for offering; Hartford, U.S. Bancorp list; RBS jumps on dividend news

By Stephanie N. Rotondo

Portland, Ore., April 25 - The preferred stock market had another up day Wednesday, according to market sources.

"Everything was pretty much up," one source said.

In the primary, BB&T Corp. announced plans for an offering of up to $200 million series D noncumulative perpetual preferreds. The deal was said to have "strong retail demand," according to one trader, but it was not performing as well as other recent deals.

Also in recent deals, both Hartford Financial Services Group, Inc.'s $600 million of 7.875% fixed-to-floating-rate $25-par junior subordinated debentures due April 15, 2042 and U.S. Bancorp's $1.09 billion offering of 6.5% fixed-to-floating-rate series G noncumulative perpetual preferred stock officially listed on the New York Stock Exchange.

"I'm still hearing there's a big calendar of new issues coming out," a trader said. With the Federal Reserve indicating that the economy is gaining strength, that could well be the case, he opined.

In secondary dealings, Royal Bank of Scotland Group plc had a "big jump," a source remarked. The gains came as it was reported that the Edinburgh-based bank declared a dividend on two series of preferreds. However, the source noted that the news was "confusing," as the payments were on two series of "must-pays" and not on any series that were previously mandatory no-pays.

"People took it to mean that they were declaring dividends on the no-pays, but that was not the case," he said. "The bank wasn't being clear."

BB&T plans new deal

BB&T will issue at least $200 million of series D noncumulative perpetual preferreds. Price talk is 5.9% to 5.95%, according to a trader.

The trader also noted that the deal was receiving "strong retail demand," although that surprised him given that other deals - such as PNC Financial Services Group, Inc.'s recent 6.125% fixed-to-floating-rate series P noncumulative perpetual preferreds - had higher yields.

Around mid-afternoon, the trader saw the preferreds with $24.65 to $24.70 bids in the gray market.

After the market closed, a source quoted the paper at $24.72 bid, $24.78 offered, adding that it had been trading as low as $24.60, "which is really low for the gray market."

As of press time, the deal had not priced.

Bank of America Merrill Lynch, BB&T Capital Markets, Deutsche Bank Securities Inc. and Wells Fargo Securities LLC are the joint bookrunners. Citigroup Global Markets Inc., Stifel Nicolaus & Co. Inc. and UBS Securities LLC are the lead managers.

BB&T will apply to list the new preferreds on the New York Stock Exchange under the ticker symbol "BBTPD." Settlement is expected May 1.

Each preferred has a liquidation preference of $25,000. They will be issued as $25 depositary shares each representing a 1/1,000th interest in a preferred.

Proceeds will be used for general corporate purposes. These may include potential acquisitions, stock repurchases, the repayment and/or refinancing of debt obligations, which may include the redemption of trust preferreds, and extending credit to or funding investments in BB&T subsidiaries.

BB&T is a Winston-Salem, N.C.-based financial holding company.

Hartford lists

Hartford Financial Services Group's $600 million of 7.875% fixed-to-floating-rate $25-par junior subordinated debentures due April 15, 2042 listed on the NYSE on Wednesday, a trader said.

The ticker symbol is "HGH." The notes closed at $26.15.

The deal priced April 3.

The interest rate on the notes will be fixed until April 15, 2022. It will then be Libor plus 559.6 basis points. The floating rate will be reset quarterly.

Hartford Financial is an insurance and financial services company based in Hartford, Conn.

U.S. Bancorp hits exchange

Also listed Wednesday was U.S. Bancorp's 6.5% fixed-to-floating series G noncumulative perpetual preferred stock. The symbol is "USBPN."

The listing came rather quick, as the deal just priced last week.

The preferreds closed up 14 cents at $25.69.

Dividends will be fixed at 6% until April 15, 2017, at which time the rate will be calculated yearly at Libor plus 486.125 basis points.

U.S. Bancorp is based in Minneapolis.

RBS up on dividend payment

News that Royal Bank of Scotland declared dividends on two series of preferreds sent the bank's preferreds into higher territory - despite the fact that the news was not what the market seemed to think it was, a source said.

The 5.9% noncumulative guaranteed trust preferreds (NYSE: RBSPE) gained 26 cents, or 1.9%, closing at $13.96. The 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG) earned 27 cents, or 1.97%, to end at $13.95.

In terms of the day's biggest percentage gainers, several of the RBS issues made that list. The 6.4% series M noncumulative dollar preference shares (NYSE: RBSPM) moved up 37 cents, or 2.28%, to $16.59, while the 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) increased 40 cents, or 2.41%, to $17.03.

News of the declared dividend was deemed "confusing" by a source.

"It wasn't really news," he said.

What happened, he explained, was that the two issues receiving dividends are issues that the bank is required to pay out on, or "must-pays." Though the market reacted as if the payouts were being made on issues that were previously mandatory no-pays, that was not the case.

"Guys in the market were either still confused or it was just focusing on how cheap these are," the source said.

Still, the optimism wasn't entirely overblown, he said. On May 4, RBS will be holding a quarterly conference call in which executives have promised to update the status of preferred issues whose mandatory no-pay period expired recently. There is a belief that dividends will in fact be turned on again.

The dividends were declared on 11% and 5.5% cumulative preference shares and will be paid on May 31.

Ally rises

Ally Financial Inc. paper was busy and better on the day. One source speculated that the action was due to "somebody switching out of one and into the other."

The 8.125% fixed-to-floating-rate series 2 trust preferreds (NYSE: ALLYPA) gained 23 cents, closing at $23.72. The 8.5% fixed-to-floating-rate series A perpetual preferreds (NYSE: ALLYPB) moved up a dime to $22.30.

Volume was about 725,450 shares and 944,450 shares, respectively.

However, the gains could also be due to an article from the New York Post that said Detroit-based Ally is planning on putting its troubled Residential Capital LLC unit into bankruptcy within a matter of weeks.

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