U.S. Bancorp prices $1 billion preferreds; Fannie, Freddie firm; Vanguard in bankruptcy

By Stephanie N. Rotondo

Seattle, Feb. 2 – Rumors of a possible new deal for Thursday proved true as U.S. Bancorp brought a $1 billion benchmark offering of 5.3% $1,000-par series J fixed-to-floating rate noncumulative preferreds.

A market source said he saw the issue at par bid.

Ahead of pricing, a trader said he was hearing price talk around 5.625%.

“But we’ll see,” he remarked. “That seems pretty cheap.”

He speculated that talk could be revised closer to 5.5%, with actual pricing coming around 5.45%.

Initial price talk was, in fact, 5.625%, though it was later revised to 5.3%.

U.S. Bancorp Investments Inc., Barclays and Morgan Stanley & Co. LLC ran the books.

Dividends will be fixed and payable semiannually through April 15, 2027. At that time, the rate will begin to float at Libor plus 291.4 basis points and will be payable quarterly.

The bank said proceeds would be used for general corporate purposes, which may include the redemption of the 6% series G fixed-to-floating rate noncumulative preferred stock (NYSE: USBPrN).

That issue was down 2 cents at $25.37 at mid-morning.

Meanwhile, Vanguard Natural Resources LLC said it had filed for bankruptcy protections on Thursday.

“Not that it wasn’t expected,” a trader commented.

Still, the oil and gas company’s preferred units were getting knocked down on the news.

Away from Vanguard, GSE paper remained busy. Fannie Mae and Freddie Mac preferreds pushed higher once again.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) added a penny to close at $9.51, while Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) improved a nickel to $9.02.

Vanguard in bankruptcy

Vanguard Natural Resources filed for bankruptcy on Thursday, a move that was not a huge surprise for the market.

That being said, the Houston-based company’s preferred units not only traded actively, but weaker. Still, the units ended off of the day’s lows.

The 7.625% series B cumulative redeemable preferred units (Nadaq: VNRBP) fell 53 cents, or 13.25%, to $3.47. The units were down $1.41, or 35.25%, at $2.59 at mid-morning.

The 7.75% series C cumulative redeemable preferred units (Nasdaq: VNRCP) declined 44 cents, or 11.06%, to $3.54. The paper was off $1.49, or 37.44%, to $2.49 earlier in the day.

And, the 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) slipped $1.40, or 28.28%, to $3.55. At mid-morning, the issue was off $1.61, or 32.62%, to $3.33.

In announcing its bankruptcy filing, Vanguard also said that it had reached a restructuring support agreement with some holders of the 7 7/8% senior notes due 2020, 8 3/8% senior notes due 2019 and the 7% senior secured second-lien notes due 2023. Under that agreement, second-lien noteholders will provide a $19.25 million equity investment. Holders of the 2019 and 2020 notes have also agreed to backstop a $255.75 million rights offering.

The plan will allow the company to eliminate about $708 million of debt under its reserve-based credit facility and senior unsecured debt.

Additionally, the company said it has obtained a committed $50 million debtor-in-possession financing facility underwritten by Citibank, NA, JPMorgan Securities LLC and Wells Fargo Bank, NA.

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