RBS issues trade heavily, source believes swap occurred; Ally mixed; First Niagara slips again

By Stephanie N. Rotondo

Portland, Ore., Dec. 14 - Preferred stock investors continued to sit on the sidelines Wednesday as they focused on Europe's ongoing financial saga and the upcoming holidays.

"Everything is on hold for Europe," a trader said. "There's no real news, no real large moves."

"There was light volume for cash-paying stuff," another market source said.

One of the day's biggest traders, however, were Royal Bank of Scotland Group plc's 7.25% series T noncumulative dollar preference shares. Over a million of the preferreds changed hands. A source opined that the action was due to a seller looking to get into the Ts, a non-paying issue, and out of the 6.75% series Q noncumulative dollar preference shares, also a non-paying issue.

Ally Financial Inc. was busy again. But one series of the company's preferreds gave back some of the gains incurred in the previous session.

In recent new issues, First Niagara Financial Group, Inc.'s preferreds were again on the weaker side. Still, market sources remained enthusiastic about the paper as well as that of DTE Energy Co.

RBS issues trade heavily

Royal Bank of Scotland's 7.25% series T preferreds (NYSE: RBSPT) were heavily traded. About 1.17 million preferreds changed hands.

A market source opined that the action was because "somebody swapped from the Qs to the Ts," as the 6.75% series Q preferreds were also active. Nearly 991,000 of them turned over.

The Ts fell a penny to $12.94, while the Qs rose 6 cents to $11.93.

Both of the issues are non-paying since April 30, 2010. Payouts on those issues was suspended for two years, and they are "expected to pay again," the source said.

RBS is a Edinburgh-based bank that is majority owned by the U.K. government.

Ally busy, mixed

Ally Financial preferreds were again trading busily, but one issue lost some gains incurred on Tuesday.

The 8.125% series A preferreds (NYSE: ALLYPA) fell 8 cents to $19.65, while the 8.5% series B preferreds (NYSE: ALLYPB) gained 9 cents, ending at $17.84.

The As had gained a dime in the previous session.

While Ally is considered one of the preferred market's "go-to" names, there has been news out that might be behind the recent moves. On Tuesday, news outlets reported that several states are getting ready to sign off on a $19 billion settlement with the banks regarding their improper foreclosure practices. However, the settlement won't be the final word as several states, including New York, California and Massachusetts, have opted out of settlement discussions and have filed lawsuits of their own.

Still, if a settlement with the majority of states is reached soon, "it could help these banks move up," a trader said previously.

First Niagara slips again

First Niagara Financial's fixed-to-floating-rate series B preferreds were again weaker Wednesday, but market sources remained optimistic about the deal.

"It's doing surprisingly well. It's still trading above par," a trader said, quoting the issue at $25.17 bid, $25.20 offered.

He opined that the $350 million issue that priced last week could list next week.

Another market source said the paper was "a touch weaker from this morning's two-sided markets," seeing it trade at $25.22.

In other recent deals, DTE Energy's 6.5% $25-par 2011 series junior subordinated notes due 2061 (NYSE: DTZ) traded up 14 cents to $25.70.

"That's also good," a trader said of the deal. He noted that given all of the "financial turmoil," some investors were seeking a "safe haven in utilities."

"It avoids the problems of the financial system," a source said. "And it's an American name. That all makes it a lot easier."

He also noted that because the issuer is not a financial institution, "it often trades at a premium anyway."

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