E.U. unveils plan to help financial system, gives preferred market a boost; Ashford prices

By Stephanie N. Rotondo

Portland, Ore., Oct. 12 - Word that the European Union had unveiled a plan to help shore up its financial system helped the preferred stock market continue to rally into Wednesday's session.

"It's looking pretty good," a trader said, though he was skeptical that the plan would be good enough to prolong the recent gains.

"We've got more dips to come," he said. "It's good to see [the recent rebound]. We're just sitting back and watching it be green."

The hopes that Europe can stem its financial crisis helped foreign issuers - particularly those that had been hit the most - regain some ground. ING Groep NV, Aegon NV, Royal Bank of Scotland Group plc and Barclays Bank plc were all trending higher.

The news was also helping domestic banks like Bank of America Corp., Ally Financial Inc. and Citigroup Inc. move upward.

Meanwhile, Ashford Hospitality Trust Inc. priced its follow-on offering of 9% series E preferreds. The real estate investment trust priced the issue at a slight discount to where the existing preferreds were already trading.

The preferreds traded down during the midweek session.

Banks gain on E.U. plan

The European Union unveiled a plan Wednesday that is aimed at helping banks shore up their books while also avoiding a collapse of the economic system.

The plan called for banks to temporarily raise capital reserves, either via the free market or through an E.U. bailout fund. Additionally, certain banks should not be allowed to pay dividends or bonuses until their capital reserves are raised, according to Jose-Manuel Barroso, president of the European Commission.

The plan also calls for the creation of a permanent bailout fund, the European Stability Mechanism. That differs from the current bailout fund in that it requires private investors to take losses on government bonds should a country need to write off debts.

The preferred market, as well as the straight equity market, took the plan as a positive and ran with it.

Foreign issuers like ING, Aegon and Royal Bank of Scotland - all of which have been beaten down to the extent that one trader opined that it was "well over done" - managed to recoup some losses in the session.

ING's 8.5% perpetual hybrid capital securities (NYSE: IGK) rose 35 cents, or 1.51%, to $23.57. Aegon's 7.25% perpetual capital securities (NYSE: AEF) moved up 38 cents, or 1.82%, to $21.31.

In the RBS complex, the 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG) increased by 51 cents, or 5.52%, to $9.75. The 7.25% noncumulative series T dollar preference shares (NYSE: RBSPT) gained 36 cents, or 2.79%, to $13.26.

"RBS continues to move higher," a trader said.

Also higher were Barclays' 8.125% series 5 noncumulative callable dollar preference shares (NYSE: BCSPD), which inched up 41 cents, or 1.72%, to $24.26.

Meanwhile, a trader said Allianz SA's 8.375% subordinated callable bonds were "moving higher," seeing them trade in the mid-$25.00 range.

"It's still a cheap piece of paper," he said. "It's the cheapest A-rated preferred out there right now."

The gains were not only seen in foreign issuers but in domestic issuers as well.

A trader said Ally Financial's preferreds were "up sharply," with the 8.5% series A preferreds (NYSE: ALLYPA) trading up 65 cents, or 3.45%, to $19.50 and the 8.125% series B preferreds (NYSE: ALLYPB) up 26 cents, or 1.43%, at $18.50.

Bank of America's 8.2% series H depositary shares (NYSE: BACPH) meantime improved by just 2 cents, closing at $22.54.

Citigroup preferreds also experienced modest gains, with the 8.5% fixed-to-floating rate trust preferreds (NYSE: CPJ) closing 21 cents higher at $25.04 and the 7.875% fixed-to-floating rate trust preferreds (NYSE: CPN) up 14 cents at $25.77.

Ashford prices add-on

Ashford Hospitality Trust announced that it priced an additional $32 million of its 9% series E cumulative preferreds.

The re-opening was priced at a discount at $23.47, yielding 9.62%. The proceeds totaled $30.04 million.

On the news, the existing preferreds - which were originally issued April 18 - fell 4 cents to $23.44.

Ashford is a real estate investment trust based in Dallas.

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