Bank of America deal upsized; Morgan Stanley preferreds firm as profit misses estimates

By Stephanie N. Rotondo

Phoenix, Jan. 20 – The primary preferred stock market seemed to be ramping up Monday as Bank of America Corp. announced an offering of $25-par series Y noncumulative perpetual preferred stock.

Additionally, a trader said he was hearing a business development company planned to launch a deal this week as well.

As for the BofA new issue, price talk was in a 6.625% area and about $250 million prefereds were expected to be sold. But with early gray market quotes in a $24.78 to $24.82 context, a trader speculated that “they are going to cut price talk and grow the deal.”

And that is exactly what happened, as the deal launched at 6.5%, with $1 billion of the preferreds being sold.

Just after launch, a trader quoted the issue at $24.78 bid, $24.80 offered. Post-pricing, another market source saw the shares at $24.75 bid, $24.80 offered.

“It is kind of funny when you size a deal four times bigger than you said...the market price goes down...we call that supply and demand,” the source said.

BofA Merrill Lynch led the deal.

In the secondary arena, Morgan Stanley & Co. Inc.’s preferreds were ticking higher after the New York-based bank reported a rise in its fourth-quarter profit.

However, the profit came in below estimates, and fixed-income trading revenue was down 14% year over year.

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