Preferred stocks gain; Bank of America gives up early gains; RBS mixed ahead of earnings

By Stephanie N. Rotondo

Seattle, April 28 – Preferred stocks were firm in Thursday trading, bucking the trend of the equity markets.

The Wells Fargo Hybrid and Preferred Securities index closed up 7 basis points. The index was up 9 bps at mid-morning.

The gains came after the Federal Reserve said on Wednesday that it was holding interest rates steady for the time being. But the central bank’s statement included enough ambiguity to allow it room to adopt or reject a rate hike come June.

The policy decision was due to continuing low inflation in the United States, despite other signs that point to economic recovery. Concerns about the global economy and Britain’s possible exit from the European Union were also factors.

As for the day’s dealings, Bank of America Corp.’s $900 million of 6% series EE noncumulative perpetual preferreds (NYSE: BACPA) easily dominated trading, with nearly 975,000 shares being exchanged.

The preferreds ended off 3 cents at $25.17. Earlier in the day, paper was rising 2 cents to $25.221.

Meanwhile, Customers Bancorp Inc.’s $50 million of 6.45% series E fixed-to-floating rate noncumulative perpetual preferreds were pegged in a $25.05 to $25.12 area.

The issue priced April 21.

Talk of new issues for next week continued to circulate.

“I am hearing a big deal for Monday or Tuesday,” a trader said, though he did not have any specifics.

RBS earnings on tap

Royal Bank of Scotland Group plc’s preferreds were mixed ahead of the Edinburgh, Scotland-based bank’s earnings release on Friday.

The 5.9% noncumulative guaranteed trust preferred securities (NYSE: RBSPE) were off a penny at $24.37, while the 6.08% noncumulative guaranteed trust preferred securities (NYSE: RBSPG) rose 4 cents to $24.50.

Ahead of its earnings, RBS said Thursday that the sale of its Williams & Glyn unit was in question.

As part of its bailout agreement, RBS was told to divest the unit, either by a sale or via an initial public offering. The company was given until the end of 2017 to deal with the subsidiary but warned Thursday that it could miss that deadline.

Paragon to miss coupon

Paragon Shipping Inc.’s 8.375% $25-par senior notes due 2021 (Nasdaq: PRGNL) improved in above-average trading on Thursday.

The gains came as the company said it would miss its May 15 coupon payment due to a lack of liquidity.

The notes increased $1.64, or 37.58%, to $6.00.

The company also missed a Feb. 15 coupon.

In early February, Paragon offered to tender for all of the $25 million issue. By the tender’s expiration, only 18.8% of the outstanding amount had been tendered and swapped for stock.

Paragon Shipping is an Athens, Greece-based shipping company specializing in the transportation of drybulk cargoes.

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