Preferreds weaken with market; First Niagara issue slips; ING falls despite tender offer news

By Stephanie N. Rotondo

Portland, Ore., Dec. 12 - Preferred stocks fell Monday, erasing most of the gains incurred on Friday, a trader said.

"We gave it right back," he said.

The market was also on the sluggish side as investors reacted to an overall softer marketplace driven by fears that Europe's latest fiscal pact would not be enough to stem the contagion.

"Nothing is really happening," the trader said.

"Volume was very light," said another market source, who added that generally, things were down on average about 12 cents on $25-par securities.

First Niagara Financial Group, Inc.'s recent new issue was lagging a bit despite its strong initial showing last week. Still, the issue remained above par.

Meanwhile, ING Groep NV announced a tender offer for some of its $1,000-par U.S.-listed securities as well as other euro-denominated issues. Investors, however, were not much impressed, and ING's preferreds continued to trade weakly.

First Niagara gives back

First Niagara's recent $350 million issue of fixed-to-floating-rate series B preferreds was trading around "$25.20-ish," a trader said.

That was down from $25.25 on Friday.

The issue from the Buffalo-based regional bank priced late Wednesday. The rate is fixed at 8.625% for five years, at which time it will become Libor plus 732.7 basis points.

The deal was originally slated to be $250 million, but it was increased to $350 million due to high demand. A source said that he heard demand was $450 million to $475 million and that, as such, pricing was "reigned in" to 8.625% from 8.75%.

Additionally, the company canceled a $37.5 million over-allotment option.

The deal freed to trade on Thursday.

Goldman Sachs & Co. is the global coordinator. 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 bank's acquisition of branches of HSBC Bank USA, NA.

ING limps along

Amsterdam-based ING Groep said Monday that it offered to buy back or exchange up to $7.7 billion of subordinated debt in an effort to boost its balance sheet.

Of the seven issues involved in the offer, two are $1,000-par dollar-denominated issues. The purchase price is 80 cents on the dollar in cash for those securities.

"That's not bad," a trader said.

Still, the news did little to bolster the company's preferreds.

The 7.375% perpetual hybrid capital securities (NYSE: IDG) fell 14 cents to $18.77, while the 8.5% perpetual hybrid capital securities (NYSE: IGK) dropped 16 cents to $21.81. The 6.375% perpetual hybrid capital securities (NYSE: ISF) lost 18 cents, or 1.08%, to close at $16.52.

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