PS Business brings upsized new deal; recent issues trade off; Bank of America active

By Stephanie N. Rotondo

Seattle, Oct. 11 – The preferred stock market was “a little softer with the bond market being down and the stock market being down,” a trader said Tuesday.

The Wells Fargo Hybrid and Preferred Securities index declined 60 basis points for the day. The index was off 33 bps at mid-morning.

By comparison, the equity markets lost 1% to 1.5%.

Despite the weak tone, PS Business Parks Inc. added a new deal to the calendar, bringing a $165 million offering of 5.2% series W cumulative preferred stock.

Price talk was 5.25%, according to a market source. The deal came upsized from $100 million.

Prior to pricing, a source placed the issue at $24.70.

BofA Merrill Lynch, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC are running the books.

As for deals priced last week, they were softening along with the market.

Bluerock Residential Growth REIT Inc.’s $67.5 million of 7.125% series D cumulative preferreds – a deal from Oct. 5 – were “kind of wide” at $24.55 bid, $24.80 offered, a trader reported.

“I think people are dumping whatever they had leftover,” the trader opined.

The preferreds finished at $24.57, off 23 cents.

Public Storage’s $350 million of 4.9% series E cumulative preferreds were meantime seen “hanging around” a $24.72 to $24.75 area, according to a trader at mid-morning.

The paper ended down 30 cents, or 1.21%, at $24.55.

That issue came Oct. 6.

Also from Oct. 6, Chimera Investment Corp.’s $135 million of 8% series A cumulative redeemable preferreds were pegged at $24.60 bid, $24.70 offered.

“It’s probably just the manager buying there,” a trader remarked.

The issue came in just below that market at $24.58. That was down 22 cents on the day.

In the secondary, Bank of America Corp.’s floating-rate series E noncumulative preferreds (NYSE: BACPE) dominated overall trading. The preferreds were weakening with the market, falling 66 cents, or 2.51%, to $25.60.

That issue – a $1.85 billion offering that priced Nov. 1, 2006 – will be added to the S&P U.S. Preferred Stock index at the close of business on Oct. 21, along with 19 other issues.

One issue will be dropped from the index.

Vanguard improves

Vanguard Natural Resources LLC’s preferreds were trading up on Tuesday, even as domestic crude oil prices retreated 1.2% on the day.

In fact, Vanguard’s preferreds were among the day’s biggest percentage gainers.

The 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) rose $1.60, or 50%, to $4.80. The 7.625% series B cumulative redeemable preferred units (Nadaq: VNRBP) – the most active of the two issues – improved $1.22, or 38.98%, to $4.35.

On Oct. 3, the MLP said that it was skipping a $15 million coupon payment on its senior notes as it waited to see how banks would recalculate its credit facility.

As for oil prices, they came in Tuesday following a 3% gain seen on Monday. The gains were due to comments made by OPEC and Russia regarding the possibility of a production cut agreement.

However, the commodity was pressured on Tuesday on concerns a deal might not appear.

It did not help that the International Energy Administration reported record-high production from OPEC in September.

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