BB&T brings upsized new deal; Ally gains on 'decent' earnings; RBS paper gives up some gains

By Stephanie N. Rotondo

Portland, Ore., April 26 - Preferred stocks were firm again Thursday, according to market sources.

"Everything was up a dime or so," a trader said.

BB&T Corp. brought the day's only new issue to market. The company sold an upsized offering of $500 million 5.85% series D noncumulative perpetual preferreds. Price talk was also tightened.

Meanwhile, Ally Financial Inc. released its first-quarter results, which showed an increased profit year over year.

"Ally had decent earnings, so their preferreds went up," a trader remarked.

After running up Wednesday on news of a dividend payment, Royal Bank of Scotland Group plc gave back some of its gains. As it turned out, the dividend payment was not all that the market was making it out to be.

BB&T deal prices

BB&T priced a $500 million offering of 5.85% series D noncumulative perpetual preferreds on Thursday.

Ahead of pricing, a trader saw paper at $24.85 in the gray market.

Price talk was 5.9% to 5.95%, according to a trader, but it was later revised. The deal was also upsized from $200 million.

Bank of America Merrill Lynch, BB&T Capital Markets, Deutsche Bank Securities Inc. and Wells Fargo Securities LLC are the joint bookrunners. Citigroup Global Markets Inc., Stifel Nicolaus & Co. Inc. and UBS Securities LLC are the lead managers.

BB&T will apply to list the new preferreds on the New York Stock Exchange under the ticker symbol "BBTPD." Settlement is expected May 1.

Proceeds will be used for general corporate purposes. These may include potential acquisitions, stock repurchases, the repayment and/or refinancing of debt obligations, which may include the redemption of trust preferreds, and extending credit to or funding investments in BB&T subsidiaries.

BB&T is a Winston-Salem, N.C.-based financial holding company.

Ally firms on numbers

Ally Financial's preferreds got a boost after the Detroit-based bank reported a higher profit from the year before.

Nearly 1.27 million of the 8.125% fixed-to-floating-rate series 2 trust preferreds (NYSE: ALLYPA) changed hands, rising 35 cents, or 1.48%, to $24.07. The 8.5% fixed-to-floating-rate perpetual preferreds (NYSE: ALLYPB) were not as active, with only about 126,000 shares trading. Still, the preferreds rose 48 cents, or 2.15%, to $22.78.

For the first quarter, Ally reported a net profit of $310 million, compared with a profit of $146 million the year before.

However, the company did not disclose what it plans to do about its troubled Residential Capital LLC unit.

As previously reported, an article in the New York Post on Wednesday indicated that Ally had in fact already made a decision to place Minneapolis-based ResCap into bankruptcy within a matter of weeks. Though Ally gave no specific details as to its plans, its top executive did make a telling remark.

"We think that the single most important thing that we can do to preserve and enhance shareholder value is to distance Ally from the mortgage business," chief executive officer Michael Carpenter said during a conference call.

In addition to Carpenter's remarks, a look at the looming payments ResCap faces within the next month only fuel chatter that there will be no other way to deal with the subsidiary than to bankrupt it. Last week, ResCap missed a $20 million interest payment. Though it has 30 days to make the payment until a default actually occurs, there is also a more than $300 million payment coming due May 4. On top of that, a $2.1 billion loan made to ResCap by Ally matures May 14.

RBS gives back

After running up on Wednesday on news of a dividend payout, some Royal Bank of Scotland preferreds came back in as it turned out the news was not all it was cracked up to be.

The 6.4% series M noncumulative dollar preference shares (NYSE: RBSPM) dropped 3 cents to $16.56, while the 6.35% series N noncumulative dollar preference shares (NYSE: RBSPN) fell 3 cents to $16.40. The 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) declined 8 cents to $16.95.

Some issues, however, managed to hang on to Wednesday's gains and even add a little more come Thursday.

The 5.9% noncumulative guaranteed trust preferreds (NYSE: RBSPE) inched up a penny to $13.97, and the 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) rose 3 cents to $18.92.

The Edinburgh-based bank said Wednesday that it declared dividends on two series of preferreds. This got investors excited, as they believed the payouts to be on certain mandatory no-pay issues. However, that was not the case.

As previously reported, news of the declared dividend was deemed "confusing" by a source. What happened, he explained, is that the two issues receiving dividends are issues that the bank is required to pay out on, or "must-pays."

"Guys in the market were either still confused or it was just focusing on how cheap these are," the source said.

Still, the optimism wasn't entirely overblown, he said. On May 4, RBS will be holding a quarterly conference call in which executives have promised to update the status of preferred issues whose mandatory no-pay period expired recently. There is a belief that dividends will in fact be turned on again.

The dividends were declared on 11% and 5.5% cumulative preference shares and will be paid on May 31.

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