Preferreds get late-day pop as Merrill redemption settled; recent issues perform well

By Stephanie N. Rotondo

Seattle, Jan. 28 – The preferred stock market popped in the final minutes of trading on Thursday, and one market source opined that it had to do with the settlement of the redemption of Merrill Lynch-linked trust preferreds.

“There was a lot of cash floating around from that,” the source said. “In the last half hour, there were a fair number of order imbalances which we ascribe to those investors who waited until the end to reinvest...with the most likely parties doing that being the ETFs...but we don’t know that for sure.”

Bank of America Corp. announced on Dec. 29 that it would redeem $2 billion of outstanding trust preferreds – or TruPs – on Jan. 29.

A preferred stock trader had noted that “everything was getting lifted for awhile” in early Thursday trading.

However, he remarked that as the broader markets started to wane, so did preferreds. Still, the Wells Fargo Hybrid and Preferred Securities index was up 15 basis points at mid-morning.

The index closed up 40 bps – with about 20 bps being added in the last half an hour.

Also firming were recent new issues, such as Citigroup Inc.’s $900 million of 6.3% series S noncumulative preferreds.

The preferreds closed at $25.10, up 15 cents on the day, a source reported. Earlier in the session, a trader pegged the issue “right around par” at $24.96 bid, $24.99 offered.

The issue priced Tuesday and freed to trade on Wednesday.

Qwest Corp.’s $235 million of 7% $25-par notes due 2056 – a deal that priced on Monday and freed on Tuesday – were meantime seen at $24.90 bid at mid-morning. Those securities also firmed throughout the day, eventually ending up 6 cents at $24.95.

Among deals priced last week, Bank of America’s $1 billion of 6.2% series CC noncumulative preferreds rose 48 cents, or 1.91%, to $25.58. In earlier trading, the preferreds were seen bid at $25.18. Wells Fargo & Co.’s $875 million of 5.7% class A series W noncumulative perpetual preferreds added 37 cents, or 1.48%, to close at $25.40.

At mid-morning, the Wells Fargo preferreds were quoted at $25.20 bid.

Wells Fargo’s preferreds came Jan. 19, and BofA’s preferreds priced on Jan. 21.

Oil and gas space boosted

Domestic crude prices were popping on Thursday as Saudi Arabia indicated it was willing to talk about cutting production amid a supply glut that has weighed on prices for more than a year.

West Texas Intermediate crude improved by 3.78% to close at $33.52 a barrel. That was down from intraday highs but still well up for the day.

Thursday’s oil gain marked the third straight day of upward momentum for the commodity.

In response, names like Breitburn Energy Partners LP were moving up. The 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were up $1.45, or 22.17%, at $7.99.

Vanguard Natural Resources LLC’s 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) were also better, rising $1.24, or 15.74%, to $9.12.

And in Legacy Reserves LP, the 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) firmed by 38 cents, or 13.72%, to $3.15.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.