Preferreds little moved by Fed announcement; Valley National frees up; RBS sees glitch

By Stephanie N. Rotondo

Phoenix, June 17 – A preferred stock trader said the market was “in a holding pattern” on Wednesday.

The Wells Fargo Hybrid and Preferred Securities index was flat at mid-morning but ended the session off 3 basis points.

The muted movement came as investors digested the latest announcement from the Federal Open Market Committee as it concluded its two-day meeting. After the meeting, Fed officials said that the U.S. economy looked to be recovering from a weak winter and that things appeared on track for an interest rate increase in September.

The committee forecast economic growth of 1.8% to 2% this year. However, that was down from previous estimates of 2.3% to 2.7% growth.

Despite lowering their guidance, a majority of Fed officials signaled their support of a hike later this year.

As for the day’s dealings, Valley National Bancorp brought $115 million of 6.25% series A fixed-to-floating rate noncumulative preferreds late Tuesday.

The deal came upsized from $110 million and in line with talk.

On Wednesday, a trader said the issue freed early in the day and was “moving up.”

He saw the issue trade at $24.98 early in the day, though he quoted the paper at $24.88 bid, $24.95 offered just ahead of the market’s close.

Still, that was up from Tuesday’s levels of $24.70 to $24.77.

The preferred offering – which was led by Sandler O’Neill + Partners LP, Keefe Bruyette & Woods Inc. and RBC Capital Markets – was done concurrently with a $100 million sale of 4.55% subordinated debentures due 2025. That issue also came upsized, from $90 million.

When declared, dividends on the preferreds will be fixed and payable semiannually through June 30, 2025. After that, dividends will be payable quarterly and will be calculated at Libor plus 385 basis points.

The preferreds become redeemable on or after June 30, 2025 or within 90 days of a regulatory capital treatment event at par plus accrued dividends.

In other recent deals that have yet to list, AmTrust Financial Services Inc.’s $150 million of 7.25% $25-par junior subordinated notes due 2055 – a deal priced Thursday – were also continuing to improve, according to a trader.

The trader pegged the notes in a $24.80 to $24.90 context, seeing a $24.85 trade.

But like the Valley National deal, the notes came in slightly by the end of business, closing at $24.80 bid, $24.82 offered.

The issue – which came via Morgan Stanley & Co. LLC, UBS Securities LLC and Keefe Bruyette & Woods – freed to trade on Monday.

Another glitch for RBS

Royal Bank of Scotland Group plc ran into trouble yet again on Wednesday as a computer glitch left about 600,000 electronic payments in the ether.

The payments included directly deposited wages, tax checks and disability benefits. The Edinburgh, Scotland-based bank said it could take until Saturday to get all payments to where they need to go.

Just seven months ago, RBS was fined £56 million for a 2012 technology fiasco that locked out millions of customers from their accounts for several days.

Following that news, RBS preferreds were mostly weaker on the day.

The 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) were the most actively traded securities of the day, with over 1.17 million shares being exchanged. The issue closed off 4 cents at $25.12.

The 6.4% series M noncumulative dollar preference shares (NYSE: RBSPM) meantime declined a nickel to $25.12, while the 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) inched up a penny to $25.44.

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