Raymond James Sells First 30-Year Bonds to Pay for Morgan Keegan

Raymond James Financial Inc. (RJF), the regional brokerage that’s purchasing Morgan Keegan & Co. from Regions Financial Corp., sold $350 million of 30-year preferred debt for the first time to help fund the acquisition.

Proceeds will be used, with cash on hand, $358 million from a stock sale and funds from at least one other senior debt offering to pay the $930 million cash portion of the acquisition, the St. Petersburg, Florida-based company said in a regulatory filing today. The company issued $350 million of 6.9 percent senior preferred notes, according to data compiled by Bloomberg.

Raymond James is the first U.S. regional bank to sell 30- year bonds this year, following larger lenders Citigroup Inc. (C) and Bank of America Corp. in issuing the long-maturity securities. Yields on debt maturing in 15 years or more have plunged to 4.94 percent this week, the lowest in data going back to May 1984, according to Bank of America Merrill Lynch indexes.

As an independent broker-dealer, “it’s interesting they would issue debt, period,” said Anthony Valeri, a market strategist with LPL Financial in San Diego, which oversees $330 billion. “Looks like another case of taking advantage of low borrowing rates and trying to lock it in for as long as possible,” he said in an e-mail.

Citigroup Debt Sale

Citigroup, based in New York, sold $1 billion of 5.875 percent, 30-year bonds last month that paid 297 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. Charlotte, North Carolina-based Bank of America Corp. sold $1.5 billion of 5.875 percent, 30-year debt on Feb. 2 at the same basis-point spread, Bloomberg data show.

Citigroup has an A3 rating from Moody’s Investors Service and A- from Standard & Poor’s, while Bank of America has a Baa1 grade and A- rating from S&P, Bloomberg data show. Raymond James is rated lower, with a Baa2 from Moody’s and BBB from S&P, the data show.

It makes sense that Raymond James would pay a higher yield than Bank of America and Citigroup based on its lower credit rating, Valeri said.

Overall, companies have offered at least $20.9 billion of debt due in 30 to 31 years in the past two months, Bloomberg data show.

Raymond James offered 10-year notes in an inaugural bond sale in August 2009 and raised $250 million through five-year notes in April last year, making this the company’s longest maturity, Bloomberg data show.

JPMorgan Chase & Co. (JPM), Citigroup. and Raymond James managed the 30-year debt offering for the brokerage, according to the filing.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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