Banks firm ahead of CCAR results; Arlington Asset plans $25-par notes; American Realty up

By Stephanie N. Rotondo

Phoenix, March 11 – The preferred stock market was muted in Wednesday trading as investors prepared for the release of the Federal Reserve’s Comprehensive Capital Analysis and Review of U.S. banks after the market closed.

“After they announce [the results], that could change things,” a trader said, noting that it could spur the primary market to start kicking out new deals.

The results showed that 26 banks passed the test without qualification, including Citigroup Inc., which failed the year before. Bank of America Corp. also passed, though it needs to make certain adjustments and resubmit its capital plan by Sept. 30.

Three other banks – JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley & Co. Inc. – passed after revising their proposals.

However, the U.S. units for Deutsche Bank AG and Banco Santander SA failed. Santander also failed the year before.

Ahead of the release, bank paper was moving to higher ground.

JPMorgan’s 6.125% series Y noncumulative preferreds (NYSE: JPMPF) rose 2 cents to par, while Bank of America’s 6.5% series Y noncumulative preferreds (NYSE: BACPY) improved 3 cents to $25.22.

Wells Fargo & Co.’s 8% series J class A noncumulative perpetual preferreds (NYSE: WFCPJ) were steady at $28.76.

Goldman Sachs’ floating-rate series D noncumulative preferreds (NYSE: GSPD) was one of few outliers in the banking arena, declining 2 cents to $25.04.

Despite the lack of liquidity, the preferred space overall was continuing to edge upward, and one trader noted that the space had recovered what was lost in a sell-off on Friday.

The Wells Fargo Hybrid and Preferred Securities index closed up 9 basis points. The index was up 17 bps at mid-morning.

Arlington to price notes

Arlington Asset Investment Corp. announced a $25 million offering of $25-par senior notes due March 2025 (expected ratings: BBB) on Wednesday.

Price talk is 6.75%, according to a trader.

The trader said he had yet to see any gray markets for the new issue. However, the company’s 6.625% $25-par senior notes due 2023 (NYSE: AIW) closed up a dime at $24.30.

RBC Capital Markets is the bookrunning manager. Compass Point, Ladenburg Thalmann & Co. Inc., Maxim Group LLC, MLV & Co. LLC, Sterne Agee & Leach Inc. and Wunderlich Securities Inc. are the co-managers.

Proceeds will be used to acquire certain target assets, expected to consist primarily of agency-backed mortgage-backed securities and might also include private-label MBS.

Arlington Asset Investment is a Washington, D.C.-based investment firm that invests in mortgage-related securities.

American Realty gains

American Realty Capital Properties Inc.’s 6.7% series F cumulative redeemable preferreds (Nasdaq: ARCPP) gained 8 cents to close at $23.58 Wednesday as investors reacted to news out late Tuesday regarding the appointment of a new chief executive officer.

The real estate investment trust – which has offices in Phoenix and New York – said Tuesday that Glenn J. Rufrano will take over the position of CEO on April 1 from interim CEO William Stanley.

Stanley took the post in mid-December when Nick Schorsch stepped down from the role, following an accounting probe that resulted in the departure of several executives and the company having to restate earnings.

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