First Niagara brings upsized deal, which trades above par; ING preferreds pressured by charge

By Stephanie N. Rotondo

Portland, Ore., Dec. 7 - Rumors of a new issue from a small regional bank proved true Wednesday when First Niagara Financial Group Inc. announced an underwritten offering of series B noncumulative perpetual preferreds.

Upon pricing, the deal was already trading above par in the grey market. Pricing was revised to the downside due to a high level of demand.

In the secondary realm, ING Groep NV was seen taking a hit after news came out that the company's U.S.-based insurance unit was facing a $1.5 billion one-time charge against its fourth-quarter results.

Overall, the market traded off modestly.

"There was a lot going on," a market source said. For instance, Standard & Poor's released rating changes for regional banks based on the agency's new criteria and also said that large international banks were being placed on review.

Additionally, another round of stress-test results are expected to come out Thursday afternoon, which could have an impact on the markets.

First Niagara issue sizzles

First Niagara Financial Group brought a $350 million underwritten offering of fixed-to-floating-rate series B noncumulative perpetual preferreds on Wednesday.

The deal was originally slated to be $250 million, but demand was about $450 million to $475 million, according to a market source. Therefore, the company elected to increase the size of the deal.

There is a $37.5 million over-allotment option, according to a company news release from earlier in the day when the issue size was still $250 million.

In addition to increasing the size, the initial dividend was "reigned in" to 8.625% from 8.75%. The rate is fixed until Feb. 15, 2017, at which time it will be Libor plus a spread.

"It seems to have gone very well," the source said, seeing the preferreds offered between $25.15 and $25.20 in the grey market.

"It's the first financial that's done really well in a long time," he said. "It indicates that people are starved for yield."

First Niagara can call the issue (expected Baa2/BB+/B+) on any dividend payment date on or after Feb. 15, 2017 at par plus any declared and unpaid dividends.

Goldman Sachs & Co. is the global coordinator for the offering, and Bank of America Merrill Lynch is the physical bookrunner. Goldman Sachs, Merrill Lynch and Wells Fargo Securities, LLC are the joint bookrunning managers. Citigroup Global Markets Inc. is the joint lead manager, and Sandler O'Neill + Partners, LP is co-manager.

Proceeds will be used to complete the Buffalo-based bank's acquisition of branches of HSBC Bank USA, NA, which was announced July 31.

ING hurt by charge

ING Groep was again under pressure on Wednesday, as the company said its U.S.-based insurance unit was facing a $1.5 billion one-time charge against its fourth-quarter earnings.

The charge was attributed to the fact that lower interest rates and declining equities had hurt the business, which is currently in the process of being wound down.

The 7.375% perpetual hybrid capital securities (NYSE: IDG) slipped 9 cents to $19.19, and the 8.5% perpetual hybrid capital securities (NYSE: IGK) dropped 6 cents to $22.21.

ING is an Amsterdam-based financial services firm.

First Industrial gains

First Industrial Realty Trust Inc.'s 7.25% series J cumulative redeemable preferreds (NYSE: FRPJ) traded quite actively during the midweek session, according to a market source.

More than 688,000 of the preferreds changed hands, which the source said was "more than one-tenth of the whole deal."

The issue rose a dime to $22.00.

There was no fresh news out on the Chicago-based real estate investment trust. However, last week the company declared a $0.45313 dividend on the paper to holders of record as of Dec. 15. The dividend is payable Jan. 2.

DTE sees modest move up

DTE Energy Co.'s 7.8% trust preferred stock (NYSE: DTEPA) was another active issue, though it only traded up fractionally, a source said.

The preferreds earned half a penny to end at $25.27.

The source noted that the securities are being called - an effort that will be paid for with proceeds from the company's recent $280 million issue of junior subordinated capital securities.

DTE is a Detroit-based energy provider.

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