First Union Corp. underwrote its first trust-preferred securities deal for another banking company this week.
With the help of Wheat First Butcher Singer, a regional broker it acquired in February, First Union acted as sole manager for a $150 million issue of trust-preferred securities for First Citizens Bancshares, a $9 billion-asset banking company in Raleigh, N.C.
"This deal was our shot at showing what we could do without help from anyone else," said bank bond analyst Stanley T. August of First Union Capital Markets.
The nation's sixth-largest banking company got section 20 underwriting powers from the Federal Reserve Board last July. According to analysts, few banking companies with section 20 powers have, acting alone, underwritten trust-preferred securities for another bank.
The securities, which are considered debt, have many equity-like features and are typically underwritten by major Wall Street firms.
Officials at Charlotte, N.C.-based First Union agreed that the deal would not have been possible without Wheat First's strong client relationships.
What is now called Wheat First Union has underwritten trust-preferred securities for several other banks in North Carolina. It is best known for its equity underwriting activities.
"We were able to do together what neither one of us could do by ourselves," said Mr. August. "The marriage between First Union and Wheat First Butcher has opened up Wheat's relationships to us and given Wheat the capital infrastructure and capital base to do more sizable deals."
This deal is the first debt issue for First Citizens, the largest family-controlled bank in the country. It had recently scooped up 15 branches from Signet Bank and could be looking for other branch acquisitions.
The issue was priced late Monday evening and started trading Tuesday. It came with an 8.05% coupon and was priced at 205 basis points over the 30- year bond.
The deal was rated Baa3 by Moody's Investors Service and BB-plus by Standard & Poor's.
William Ingram, syndicate manager at First Union Capital Markets, said the market had expected the spreads on the issue to come wider.
"Spreads came tighter because of the name of First Citizens," said Mr. Ingram. "The merger between First Union and Wheat First Butcher is beginning to pay off."
