Preferreds erase early losses, end firm to start month; Bank of America, Wells Fargo list

By Stephanie N. Rotondo

Seattle, Feb. 1 – The preferred stock market started out the new month with a weaker tone amid weak economic data from China and renewed declines in oil prices but ultimately clawed its way back to end in the black.

The Wells Fargo Hybrid and Preferred Securities index closed up 17 basis points. The index was off 10 bps at mid-morning.

A new report showed that manufacturing in China contracted at the highest rate in the last four years. That news, combined with reports that any production cuts among OPEC and non-OPEC oil producers would likely not come soon, pushed crude oil prices down nearly 6.5%.

In turn, oil and gas-linked preferreds were waning.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) fell $1.16, or 15.61%, to $6.27. Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) meantime dropped $1.13, or 18.9%, to $4.85.

Elsewhere, recently priced issues from Bank of America Corp. and Wells Fargo & Co. began trading on the New York Stock Exchange on Monday.

Bank of America’s $1 billion of 6.2% series CC non-cumulative perpetual preferred stock began trading under the ticker “BACPC.” Wells Fargo’s $875 million issue of 5.7% series W class A noncumulative perpetual preferred stock then listed under the symbol “WFCPW.”

Bank of America’s preferreds came Jan. 21. Wells Fargo priced its securities on Jan. 19.

The Bank of America paper ended at $25.43, which compared to $25.30 at the open. The Wells Fargo issue closed at $25.33, versus $25.27 at the open.

Among recent deals that have not yet listed, Citigroup Inc.’s $900 million of 6.3% series S noncumulative preferreds were pegged at $25.22 by a market source.

The source said the paper was off 3 cents on the day, adding that the deal’s greenshoe was exercised.

With the addition of the over-allotment option, the issue increased to $1.35 billion, or 41.4 million shares.

That deal came Tuesday.

Banc of California comes tight

Banc of California Inc. brought a new issue on Monday, following rumors that a regional bank planned to tap the market.

The Irvine, Calif.-based financial institution initially set out to sell $50 million of series E noncumulative perpetual preferreds but ultimately sold $125 million. The preferreds came with a 7% dividend, which was tight to the 7% to 7.125% price talk.

A source said the last gray market quote for the new issue was $24.65 bid, $24.75 offered.

“So obviously not a great underwriting,” he said.

BofA Merrill Lynch and UBS Securities LLC were the joint bookrunners. Keefe Bruyette & Woods was joint lead manager, and Sandler O’Neill + Partners LP and Wunderlich Securities were the co-managers.

Dividends will be payable quarterly. The issue becomes redeemable on or after March 15, 2021 at par plus accrued dividends. The preferreds can also be redeemed within 90 days of a regulatory capital treatment event.

Proceeds will be used for general corporate purposes.

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