BofA was able to raise significant equity capital yesterday:
Bank of America Corp., the biggest U.S. bank by assets, said it raised about $13.5 billion in a sale of common stock as part of an effort to boost capital and weather an extended recession.
The bank issued 1.25 billion shares at an average price of $10.77 each, according to a statement today. The Charlotte, North Carolina-based company plans to boost common equity capital by $17 billion through the sale of stock and by converting preferred shares mostly held by institutional investors, Chief Executive Officer Kenneth Lewis said May 7.
…
Bank of America expects to add $10 billion more in capital through asset sales and at least $7 billion from improved pretax profits, the company said on May 7. Those numbers may change as the bank considers options to achieve its $33.9 billion target, spokesman Jerry Dubrowski said.
The Pension Benefit Guaranty Fund in the States is having about as much fun as other guarantors:
Pension Benefit Guaranty Corp.’s deficit tripled to $33.5 billion in the past six months as more companies canceled retirement plans amid the U.S. recession, according to the head of the government-owned corporation.
About $11 billion is for “completed and probable terminations,” and $7 billion is from an increase in interest rates that boosted liabilities, Vince Snowbarger, the acting PBGC director, said in written testimony to be delivered tomorrow to the Senate Special Committee on Aging.
…
The potential for General Motors Corp. and Chrysler LLC to end their plans has left the PBGC facing the prospect of adding 900,000 current and future beneficiaries. The PBGC, which pays retirement income to almost 44 million Americans, estimates that $77 billion of the automotive industry’s pensions are underfunded, with about $42 billion of that not funded at all.
There’s a report by internal audit of the fund that claims former PBGC director Millard was, at least, sloppy in separating his various activities – with the Placement Agent scandal still being whipped up, the response could be draconian.
Looks like the SEC is losing the jurisdictional catfight with the Fed:
The Obama administration may call for stripping the Securities and Exchange Commission of some of its powers under a regulatory reorganization that could be unveiled as soon as next week, people familiar with the matter said.
The proposal, still being drafted, is likely to give the Federal Reserve more authority to supervise financial firms deemed too big to fail. The Fed may inherit some SEC functions, with others going to other agencies, the people said. On the table: giving oversight of mutual funds to a bank regulator or a new agency to police consumer-finance products, two people said.
The politicians have to assign blame and shuffle responsibilities in order to make it clear that nothing was their fault.
The Obama administrations shameful conduct in the Chrysler bankruptcy is having some repercussions:
Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLC’s bankruptcy.
Obama put Chrysler under court protection on April 30 after lenders balked at a proposal giving them about 29 cents on the dollar for their $6.9 billion in debt. The investors said the president’s plan favored a union retiree medical fund whose claims ranked behind them for repayment. It was offered a 55 percent equity stake in the automaker.
Pacific Investment Management Co., Barclays Capital and Fridson Investment Advisors have joined Schultze Asset Management LLC in saying lenders may be unwilling to back unionized companies with underfunded pension and medical obligations, such as airlines and auto-industry suppliers, because Chrysler’s creditors failed to block Obama’s move.
Whether or not the rhetoric influences yield spreads and whether those yield spreads influence conduct is something we’ll just have to wait and see.
Anne Sibert pens a provocative thesis on VoxEU, Why did the bankers behave so badly?:
Greedy bankers are getting most of the blame for the current financial crisis. This column explains bankers did behave badly for mainly three reasons. They committed cognitive errors involving biases towards their own prior beliefs; too many male bankers high on testosterone took too much risk, and a flawed compensation structure rewarded perceived short-term competency rather than long-run results.
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In a fascinating and innovative study, Coates and Herbert (2008) advance the notion that steroid feedback loops may help explain why male bankers behave irrationally when caught up in bubbles. These authors took samples of testosterone levels of 17 male traders on a typical London trading floor (which had 260 traders, only four of whom were female). They found that testosterone was significantly higher on days when traders made more than their daily one-month average profit and that higher levels of testosterone also led to greater profitability – presumably because of greater confidence and risk taking. The authors hypothesise that if raised testosterone were to persist for several weeks the elevated appetite for risk taking might have important behavioural consequences and that there might be cognitive implications as well; testosterone, they say, has receptors throughout the areas of the brain that neuro-economic research has identified as contributing to irrational financial decisions.
Well, I don’t know what’s up with the Toronto Stock Exchange. There was a problem last Friday retrieving prices that were available and today there’s a problem with availability. So I’m using an approximate, late-in-day-update to prepare today’s report. I did update the details for SLF.PR.F, though, since that one’s important.
It was another really good day for the preferred share market – and here’s a landmark for you: BAM floaters are now trading in the double digits! The low close of 6.40-69 was reached on 2008-12-18 on volume of 27,351 shares.
PerpetualDiscounts now yield 6.39% (pre-tax bid-YTW), equivalent to 8.95% interest at the standard equivalency factor of 1.4x. Long Corporates are now at 7.0%, having returned 4.63% Month-to-date and 9.29% Year-to-Date, so the pre-tax interest-equivalent spread is now about 195bp.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 3.8730 % | 1,137.4 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 3.8730 % | 1,839.4 |
| Floater | 3.31 % | 3.89 % | 84,880 | 17.60 | 3 | 3.8730 % | 1,420.9 |
| OpRet | 5.05 % | 3.99 % | 130,283 | 3.63 | 15 | 0.1167 % | 2,156.2 |
| SplitShare | 5.94 % | 5.48 % | 52,349 | 4.24 | 3 | 0.4845 % | 1,825.7 |
| Interest-Bearing | 5.99 % | 6.84 % | 27,930 | 0.60 | 1 | 0.1000 % | 1,989.2 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5059 % | 1,709.6 |
| Perpetual-Discount | 6.40 % | 6.39 % | 159,029 | 13.29 | 71 | 0.5059 % | 1,574.5 |
| FixedReset | 5.72 % | 4.83 % | 497,301 | 4.50 | 37 | 0.4306 % | 1,985.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.C | Perpetual-Discount | -2.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 17.64 Evaluated at bid price : 17.64 Bid-YTW : 6.39 % |
| IAG.PR.A | Perpetual-Discount | -1.41 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 16.76 Evaluated at bid price : 16.76 Bid-YTW : 7.00 % |
| BAM.PR.M | Perpetual-Discount | 1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 15.11 Evaluated at bid price : 15.11 Bid-YTW : 8.03 % |
| SLF.PR.D | Perpetual-Discount | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 16.94 Evaluated at bid price : 16.94 Bid-YTW : 6.69 % |
| NA.PR.M | Perpetual-Discount | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 23.58 Evaluated at bid price : 23.76 Bid-YTW : 6.36 % |
| BMO.PR.K | Perpetual-Discount | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 21.22 Evaluated at bid price : 21.22 Bid-YTW : 6.23 % |
| POW.PR.A | Perpetual-Discount | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 6.61 % |
| CM.PR.M | FixedReset | 1.08 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.06 Bid-YTW : 5.02 % |
| RY.PR.X | FixedReset | 1.09 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 26.85 Bid-YTW : 4.88 % |
| RY.PR.L | FixedReset | 1.14 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 23.41 Evaluated at bid price : 25.80 Bid-YTW : 4.57 % |
| ELF.PR.G | Perpetual-Discount | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 16.69 Evaluated at bid price : 16.69 Bid-YTW : 7.23 % |
| TD.PR.S | FixedReset | 1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 24.33 Evaluated at bid price : 24.40 Bid-YTW : 3.96 % |
| TRI.PR.B | Floater | 1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 15.25 Evaluated at bid price : 15.25 Bid-YTW : 2.60 % |
| TD.PR.P | Perpetual-Discount | 1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 6.22 % |
| PWF.PR.F | Perpetual-Discount | 1.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 6.56 % |
| GWO.PR.G | Perpetual-Discount | 1.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 20.71 Evaluated at bid price : 20.71 Bid-YTW : 6.39 % |
| BNA.PR.C | SplitShare | 1.93 % | Asset coverage of 1.8-:1 as of April 30, according to the company. Went ex-Dividend today … I wonder if anybody noticed. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 14.62 Bid-YTW : 11.66 % |
| GWO.PR.I | Perpetual-Discount | 2.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 6.64 % |
| POW.PR.C | Perpetual-Discount | 2.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 21.91 Evaluated at bid price : 22.17 Bid-YTW : 6.63 % |
| MFC.PR.B | Perpetual-Discount | 2.10 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 19.00 Evaluated at bid price : 19.00 Bid-YTW : 6.24 % |
| CIU.PR.A | Perpetual-Discount | 2.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 18.60 Evaluated at bid price : 18.60 Bid-YTW : 6.22 % |
| CM.PR.H | Perpetual-Discount | 2.50 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 18.87 Evaluated at bid price : 18.87 Bid-YTW : 6.44 % |
| ELF.PR.F | Perpetual-Discount | 2.66 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 7.28 % |
| BAM.PR.B | Floater | 5.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 10.20 Evaluated at bid price : 10.20 Bid-YTW : 3.90 % |
| BAM.PR.K | Floater | 6.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 10.22 Evaluated at bid price : 10.22 Bid-YTW : 3.89 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| SLF.PR.F | FixedReset | 727,983 | New issue settled today. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 25.79 Bid-YTW : 5.32 % |
| POW.PR.D | Perpetual-Discount | 93,700 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 18.75 Evaluated at bid price : 18.75 Bid-YTW : 6.77 % |
| BAM.PR.O | OpRet | 57,300 | YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 23.35 Bid-YTW : 7.11 % |
| RY.PR.B | Perpetual-Discount | 56,205 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 19.10 Evaluated at bid price : 19.10 Bid-YTW : 6.20 % |
| W.PR.H | Perpetual-Discount | 49,900 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-05-20 Maturity Price : 20.70 Evaluated at bid price : 20.70 Bid-YTW : 6.75 % |
| MFC.PR.A | OpRet | 47,340 | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 24.91 Bid-YTW : 4.12 % |
| There were 45 other index-included issues trading in excess of 10,000 shares. | |||
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