Preferreds rise; Bank of America frees to trade; Citigroup up; oil-linked paper gains

By Stephanie N. Rotondo

Seattle, April 19 – The preferred stock market was inching upward in Tuesday trading.

The Wells Fargo Hybrid and Preferred Securities index closed up 25 basis points. The index was up 13 bps at mid-morning.

Despite the firm tone, a trader said morning activity was dragging.

“I’m hearing rumblings of a new deal but no name,” he added.

As for Monday’s new issues, Bank of America Corp.’s $900 million of 6% series EE noncumulative perpetual preferreds freed from the syndicate as of mid-morning, according to a trader.

He pegged the issue at $25.15 bid, $25.17 offered.

After the bell, another market source said the preferreds closed at $25.18 on about 7.5 million trades.

The deal came via BofA Merrill Lynch and was upsized from $250 million. Price talk was initially around 6.125% but was later tightened to 6%.

Meanwhile, Citigroup Inc.’s $1.5 billion of 6.25% $1,000-par fixed-to-floating rate noncumulative preferreds were seen at 102.25 bid in early trading. At the close, a source quoted the issue at 101.75 bid, 102 offered.

Price talk on that issue was initially around 6.5%.

Citigroup Global Markets Inc. ran the books.

Dividends will be fixed and payable semiannually through Aug. 15, 2026. At that point, the paper will begin to pay quarterly dividends at a rate equal to Libor plus a spread of 451.7 bps.

Looking ahead, a trader noted that the Women’s Syndicate Association’s annual Spring luncheon will take place on Thursday. That could weigh on liquidity come end-of-week trading.

Oil space sees gains

Oil and gas-linked preferreds were gaining momentum on Tuesday as domestic crude popped over 3% for the day.

The commodity’s rise came as oil workers in Kuwait went on strike for the third straight day, nearly halving the OPEC-member nation’s daily production. A power outage in Venezuela and a pipeline fire in Nigeria were also weighing on daily production.

Those issues, combined with the looming refinery maintenance season, have some market players thinking the oversupplied oil space could soon rebalance.

The surge came after oil prices got hammered on Monday following a meeting of OPEC and non-OPEC producers in Doha, Qatar, on Sunday. The market had hoped that a deal to freeze production would come out of the meeting, but such a plan failed to come to fruition.

All of that news combined to push the energy preferreds into the day’s biggest percentage gainer category.

Legacy Reserves LP’s 8% series A fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYP) rose 28 cents, or 7.73%, to $3.90. The 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) meantime edged up 24 cents, or 6.52%, to $3.92.

In Vanguard Natural Resources LLC, the 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) closed up 19 cents, or 6.55%, at $3.09. The 7.875% series A cumulative redeemable perpetual preferred units (Nasdaq: VNRAP) improved by 26 cents, or 6.36%, ending at $4.35.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) pushed up 3 cents, or 1.19%, to $2.55.

Distributions on all those issues have been suspended.

BlueRock bringing add-on

BlueRock Residential Growth REIT Inc. said late Tuesday that it was selling more of its 8.25% series A cumulative redeemable preferreds (NYSE: BRGPA).

The New York-based real estate investment trust originally priced $71.88 million of the preferreds on Oct. 15, 2015.

As of Tuesday’s close, the issue was trading at $25.38, off 12 cents.

Wunderlich Securities Inc. and Compass Point are the joint bookrunners for the add-on. FBR Capital Markets and Janney Montgomery Scott LLC are the co-lead managers.

Proceeds will be used for future multifamily property acquisitions and investments, and other general corporate and working capital purposes, which may include the repayment of debt and the funding of capital improvements.

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