CommonWealth's new issue breaks from syndicate; Qwest new issue 'doing very well'; HSBC falls

By Stephanie N. Rotondo

Portland, Ore., May 31 - The preferred stock market was focused on the previous week's news and new issues on Tuesday as market players came back from an extended weekend.

In new issues, CommonWealth REIT's new issue - which was priced Thursday - broke from the syndicate on Tuesday as was expected. However, upon its release, the paper traded down, according to market sources.

Qwest Corp., however, saw its new deal trading up. The company announced the new issue of $25-par bonds during Tuesday trading, and pricing was expected on Wednesday.

Among financials, HSBC Holdings plc preferreds were seen declining in active trading. One source opined that the preferreds fell in response to an article out last week - a delayed reaction due to the holiday weekend - while another speculated it was simply a "dividend play."

CommonWealth frees to trade

CommonWealth REIT's $250 million new issue of 7.25% series E cumulative redeemable perpetual preferreds freed from the syndicate Tuesday, traders reported.

One trader quoted the issue at $24.70 bid, $24.80 offered in the gray market, while another said the paper "softened throughout the day."

"It was in a slow slide south most of the day," he said. "Opened at $24.90 [and] did hit an intra-day high of $25.00 late morning but has generally been heading south."

He said the shares closed at $24.70 on volume of nearly 900,000.

A third source pegged the preferreds at $24.70 bid, $24.75 offered.

CommonWealth is a Newton, Mass.-based real estate investment trust.

Qwest publicizes new deal

Also in new issues, Qwest announced an offering of $25-par senior notes due 2051.

Price talk was 7.375% to 7.5%, but one trader said he heard the deal would come at 7.25%. Another said he "heard a rumor they were going to grow it."

Pricing is expected Wednesday.

"It's doing very well," the first trader said, noting that it had received high retail and institutional demand.

He quoted the notes at $24.77 bid, $24.79 offered in the gray market. Another source pegged the issue at $24.72 bid, $24.78 offered, deeming the performance "almost neutral to negative" given where it was trading compared to par.

Proceeds will be used to redeem $825 million principal amount of 7.875% notes due 2011.

Qwest is a telecommunications subsidiary of CenturyLink, Inc. based in Monroe, La.

HSBC preferreds trade down

HSBC Holdings' preferreds traded down in active trading Tuesday, though it was unclear what was pressuring the shares.

The 6.5% series H preferreds fell 23 cents to $25.24 (NYSE: HBAPH) on volume of 2.3 million shares, according to a market source. The series B preferreds dropped 15 cents to $27.25 (NYSE: HCSPB) on volume of about 673,000 shares.

"I think it was a bit of holdover from last week," the source said, referring to "not necessarily favorable" news put out by the Wall Street Journal regarding the bank's shift in strategy.

The bank, which has touted itself as "the world's local bank," is potentially planning to pull out of some of its markets in an effort to cut costs.

But another source speculated that the declines could be part of a "dividend play," as both series of preferreds have a dividend coming up.

"I'd be shocked if that were the real reason," the first source said. "That would be a lot of activity for a dividend play. From a personal standpoint, I'll stand by my guesstimate of lagging activity from the news during the second half of the week. ... Or maybe it's just a combo of factors. Hard to say at this time with a high degree of certainty."

HSBC is a London-based banking and financial services firm.

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