Bank of America sells $1 billion preferreds; investors return to the market; energy names rise

By Christine Van Dusen

Atlanta, Jan. 21 – Bank of America Corp. priced $1 billion of new preferred stock in an up-and-down Thursday for the market, which saw investors – who are coming to terms with the oil-price environment – slowly return to trading and provide a small boost to beleaguered issues.

“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 on Thursday. Case in point: Resource Capital Corp.'s 8.625% fixed-to-floating rate series C cumulative redeemable preferreds (NYSE: RSOPC) were down just 3 cents to $13.65 on Thursday morning. By the close, the notes were up 59 cents to $14.27.

Some energy-linked paper also rebounded on Thursday, following 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. The securities closed at $4.28.

Other energy-related names were mixed. Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) were up 84 cents to $3.58, then later dipped to $3.31.

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 before dropping back to $2.30.

“Volume was better than it’s been – not great, but better than it has been,” a market source said.

BofA issues preferreds

In its new deal, Bank of America priced a $1 billion issue of non-cumulative perpetual preferred stock, series CC, at par of $25.00, a market source said.

The Bank of America issue included 40 million depositary shares, each representing a 1/1,000th interest in a share of non-cumulative preferred stock.

The preferreds are callable after five years.

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 Securities and Exchange Commission-registered deal.

The preferreds closed at about $24.78 in the gray market, a market source said.

“That hasn't traded well,” he said.

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

At the end of the day, the new notes were spotted between $24.78 and $24.79, a market source said.

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