Morning Commentary: Bank of America plans to sell preferreds; investors returning to the market

By Christine Van Dusen

Atlanta, Jan. 21 – Bank of America Corp. announced plans for a new issue of preferred stock on Thursday as investors slowly returned to the market and the issues that were pummeled on Wednesday recovered somewhat.

“People are putting a toe back in the water,” a trader said. “Everything is kind of mixed.”

Housing-related names, which got “smashed” on Wednesday, bounced back a bit on Thursday morning. Case in point: Resource Capital Corp.'s 8.625% fixed-to-floating rate series C cumulative redeemable preferreds (NYSE: RSOPC), which dropped on Wednesday, were down just 3 cents to $13.65 on Thursday morning.

Energy-linked paper also rebounded on Thursday, following some soothing comments from Morgan Stanley’s chief executive officer, who said that supply and demand for oil will eventually rebalance. Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) moved up 21 cents to $4.18.

Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) were up 84 cents to $3.58. And Legacy Reserves LP’s series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) moved higher by 54 cents to $3.12 on Thursday morning.

For its new deal, Bank of America is looking to issue non-cumulative preferred stock, series CC, at par of $25.00, according to a company filing with the Securities and Exchange Commission.

Each share will represent a 1/1,000th interest in a share of series CC preferred stock.

The preferreds are callable at any time at par plus accrued dividends beginning in January 2021.

The securities are expected to be listed on the New York Stock Exchange under the symbol “BAC PrC.”

BofA Merrill Lynch, Citigroup Global Markets Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, UBS Investment Bank and Wells Fargo Securities LLC are the bookrunners for the deal.

Wells Fargo trades

In other trading, the new issue of preferreds from Wells Fargo & Co. – $875 million 5.7% non-cumulative perpetual class A preferred stock, series W, that priced at par of $25.00 on Tuesday – hovered between $24.77 and $24.82 on Thursday morning, the trader said.

The issue included 35 million depositary shares, each representing a 1/1,000th interest in a share of non-cumulative perpetual class A preferred stock.

There is a $125 million over-allotment option.

The preferreds are callable on any interest payment date beginning March 15, 2021 at par plus accrued dividends.

Wells Fargo & Co. LLC was the bookrunner. The joint lead managers were Citigroup, Goldman Sachs, JPMorgan, BofA Merrill Lynch, Morgan Stanley, RBC Capital Markets and UBS Securities LLC.

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