Rumors of new mortgage program boost Bank of America; Public Storage prices year's first deal

By Stephanie N. Rotondo

Portland, Ore., Jan. 5 - Preferred stocks continued to be strong on Thursday, market sources reported.

"[Common] stocks were up slightly," one preferred source said. "We were up more."

"Banks are going crazy," said another source, noting rumors of a presidential plan to create a $1 trillion federal program aimed at helping people refinance their homes.

That news was good for Bank of America Corp., the trader added, seeing most of its preferreds up by at least 50 cents.

Meanwhile, the primary market welcomed a new issue from Public Storage. The real estate investment trust priced a $400 million issue of 5.9% series S cumulative preferreds - a much bigger deal than had been expected.

Rumors help BofA

Rumors that President Obama is considering launching a $1 trillion federal program to aid in mortgage refinancing - and to help boost the housing market - gave banks a boost on Thursday.

Bank of America in particular was benefiting from the chatter.

The 8.2% series H depositary shares (NYSE: BACPH) climbed up 60 cents, or 2.58%, to $23.82. The Merrill Lynch 8.625% series 8 noncumulative preferreds (NYSE: BMLPQ) surged 57 cents, or 2.45%, to $23.85.

"I would have thought Ally [Financial Inc.] would move further [up]," a trader said, as the possible program would likely benefit Ally as well.

Ally's 8.5% trust preferreds (NYSE: ALLYPA) gained 34 cents, or 1.70%, to end at $20.34.

After the market closed, however, White House officials reportedly refuted the rumor, stating that the president has no plans for such a program.

Financials firm

Among other financials, ING Groep NV's 8.5% perpetual hybrid capital securities (NYSE: IGK) rose 42 cents, or 1.84%, to $23.19.

Citigroup Inc.'s 7.5% T-DECS tangible dividend enhanced common stock (NYSE: CPH), a $100-par issue, meantime rose 89 cents, or 1.04%, to $86.57.

Barclays Bank plc's 8.125% series 5 noncumulative callable dollar preference shares (NYSE: BCSPD) were also stronger, closing up 52 cents, or 2.24%, at $23.76.

On the weaker side was JPMorgan Chase & Co.'s 8.625% series J noncumulative preferreds (NYSE: JPMPI), which fell a dime to $27.63.

First deal of the year

Public Storage priced a $400 million offering of 5.9% series S cumulative perpetual preferreds on Thursday, according to market sources.

The deal was "much larger" than the $50 million that had originally been expected, a market source said.

Price talk had originally been around 5.95% but was revised Wednesday to 5.9%.

The source quoted the new issue at $24.82 bid, $24.92 offered in the gray market.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are the joint book-running managers.

The preferreds were sold as depositary shares each representing a 1/1,000th interest in a cumulative preferred share of beneficial interest, series S, according to the prospectus.

Cumulative dividends will be payable quarterly beginning March 31. The preferreds can be redeemed beginning Jan. 12, 2017 at par plus accrued dividends.

There is no stated maturity, sinking fund or mandatory redemption.

Settlement is expected Jan. 12.

Proceeds will be used to make investments in self-storage facilities and in entities that own self-storage facilities, to redeem preferred securities and for other general corporate purposes.

The Glendale, Calif.-based real estate investment trust intends to list the preferreds on the New York Stock Exchange.

On Thursday, Public Storage announced that it plans to redeem $206.67 million of its 6.75% series L cumulative preferreds (NYSE: PSAPL).

"It's pretty aggressive on their end," a trader said of the swap from the 6.75% preferreds to the 5.9% preferreds. "But I think it's a good idea. They've got the credit quality to do it."

© 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.