Primary pipeline picks up with new issues from AmTrust, BofA, Morgan Stanley; Ally gains

By Stephanie N. Rotondo

Phoenix, March 12 – Preferred stocks were “up significantly” for most of Thursday as investors reacted positively to the Federal Reserve’s release of the Comprehensive Capital Analysis and Review on Wednesday, a market source said.

However, the source said the space “ironically” ended “pretty much flat.”

The Wells Fargo Hybrid and Preferred Securities index closed off 1 basis point.

The CCAR results – which showed 28 U.S. banks passing the test – caused a pick-up in the primary space.

“Finally, we got some action,” a trader said. “I believe just about every bank will be launching a straight or hybrid issue in the next month.”

In the $25-par market, AmTrust Financial Services Inc. brought $165 million of 7.5% series D noncumulative preferreds.

Meanwhile, in the $1,000-par arena, Bank of America Corp. launched a $1.9 billion offering of 6.1% $1,000-par series AA fixed-to-floating rate noncumulative preferred stock.

Price talk was around 6.75%, a trader said.

“They will definitely bring that one in,” he said ahead of pricing.

Morgan Stanley & Co. Inc. also brought a $1,000-par deal, a $1.5 billion issue of 5.5% series J fixed-to-floating rate noncumulative preferreds.

Those were being talked at 5.75%, a trader said.

“I’m sure they will bring that in,” he said pre-pricing.

Another source noted that neither bank had specifically mentioned any new issues in their capital plans. Regardless, both were “pretty well received.”

AmTrust prices new issue

AmTrust Financial sold $165 million of 7.5% series D noncumulative preferreds on Thursday.

A trader said he saw a $24.62 bid in the early gray market.

Initial price talk was 7.5% to 7.625%.

Morgan Stanley & Co. LLC, UBS Securities LLC and Keefe Bruyette & Woods Inc. were the bookrunning managers.

Proceeds will be used for general corporate purposes, which may include working capital, capital expenditures and/or strategic acquisitions.

On the heels of the new issue, AmTrust’s 7.25% series B noncumulative preferreds (NYSE: AFSIPB) were down 17 cents at $24.90.

AmTrust is a New York-based insurance company.

BofA brings $1,000-pars

Bank of America brought $1.9 billion of 6.1% $1,000-par series AA fixed-to-floating rate noncumulative preferred stock during Thursday’s session.

Initial price talk was 6.75%.

A market source said he saw the issue quoted at 100.1 bid, 100.6 offered early in the afternoon.

BofA Merrill Lynch was the bookrunner.

The dividend will be fixed until March 17, 2025, at which time it will begin floating at Libor plus 389.8 bps. While fixed, the dividends will be payable semiannually. Once floating, the dividend will be paid quarterly.

The Charlotte, N.C.-based bank can redeem the securities on or after March 17, 2025 at par plus accrued dividends. The company can also redeem the paper upon a regulatory capital treatment event.

Proceeds will be used for general corporate purposes, which may include working capital, debt reductions or redemptions or acquisitions.

In the company’s $25-par paper, the preferreds ended mixed overall.

The 6.625% series W noncumulative preferreds (NYSE: BACPW) ended down 7 cents at $25.35, while the 6.5% series Y noncumulative preferreds (NYSE: BACPY) gained 2 cents to $25.24.

Morgan Stanley’s new deal

Morgan Stanley priced $1.5 billion of 5.5% $1,000-par series J fixed-to-floating rate noncumulative preferred stock on Thursday.

A market source pegged the issue at 100.625 bid, 101 offered.

Initial price talk was 5.75%.

Morgan Stanley ran the books.

Dividends will be fixed until July 15, 2020 and will be payable semiannually during that time. On July 15, 2020, the dividend will begin floating at Libor plus 381 bps and will be payable quarterly.

The New York-based bank can redeem the preferreds on or after July 15, 2020 or upon a regulatory capital treatment event at par plus accrued dividends.

Proceeds will be used for general corporate purposes.

Ally rises on capital plan

Ally Financial Inc.’s preferreds were trending higher after the company announced its capital plan, as approved by the Federal Reserve.

The 8.125% series 2 fixed-to-floating rate trust preferred securities (NYSE: ALLYPA) gained 28 cents, finishing at $26.36, while the 8.5% series A fixed-to-floating rate perpetual preferreds (NYSE: ALLYPB) moved up 24 cents to $26.69.

Under the Detroit-based financial company’s capital plan, it will redeem all of its outstanding 7% series G fixed-rate cumulative perpetual preferred stock in April. In 2016, the company plans to redeem $500 million of its trust preferreds in the first quarter, along with a redemption or repurchase of $1 billion of its series A preferreds by the second quarter.

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