Ally preferreds boosted by talk of ResCap sale; ING's sale delayed, preferreds gain anyway

By Stephanie N. Rotondo

Portland, Ore., Feb. 8 - Preferred stocks closed out the midweek session on a modestly higher note, market sources reported.

The "big news of the day," according to one source, was Ally Financial Inc.'s plans to sell its money-losing Residential Capital LLC mortgage lending unit. The news was considered good for the Detroit-based bank, and its preferreds were trending upward as a result.

Also making headlines was ING Groep NV. The company was supposed to find out on Wednesday whether the Federal Reserve would approve its sale of its U.S. operations to Capital One Financial Corp. However, the Fed decided to delay the review until Monday. ING's preferreds moved higher on the news.

In the primary market, Regency Centers Corp.'s newly priced issue of 6.625% series 6 cumulative redeemable preferreds was doing "pretty well," a source said, seeing the issue trading above par.

Regency's existing preferreds were meantime among the day's most actively traded securities.

Ally gains on ResCap news

Ally Financial's preferreds were on the rise Wednesday as investors reacted to news that the company is looking to sell its Residential Capital mortgage lending unit.

"It should be a good thing for the company," a trader said shortly before the market closed.

The trader noted that "not everybody is going to get their money back" in the event of a ResCap sale, but "preferred holders should be fine."

The 8.5% trust preferreds (NYSE: ALLYPA) were the top trading security of the day. More than 1.8 million of the trust preferreds changed hands. They gained 38 cents, or 1.67%, to end at $23.10.

The 8.125% fixed-to-floating series A preferreds (NYSE: ALLYPB) traded up 50 cents, or 2.34%, to $21.90, with 1.33 million preferreds turning over.

News outlets reported Wednesday that Ally is talking to such buyout groups as Fortress Investment Group LLC and Cerberus Capital Management LP. Additionally, ResCap is reported to have contacted Centerbridge Capital Partners LLC and Leucadia National Corp. The plan would be to find a buyer and then put ResCap into a pre-packaged bankruptcy to facilitate the sale.

The reports cited "people with knowledge of the matter."

Minneapolis-based ResCap has been losing money for some time now and is also facing at least 22 mortgage-linked securities lawsuits. Though the parent company has provided support for the unit thus far, it has expressed its desire to decrease its amount of support in the near term.

But bondholders have already stated they would oppose any situation where ResCap would be forced into bankruptcy. Some believe bondholders might fight a bankruptcy and any attached sale by saying that ResCap was not ring-fenced and therefore cannot be separated from its parent organization.

ING rises despite Fed delay

A market source said he was "kind of surprised" by gains incurred by ING Groep's preferreds on Wednesday.

The Amsterdam-based financial institution was expecting to hear Wednesday whether the Fed would allow the sale of ING's ING Direct USA to Capital One. But a scheduling conflict resulted in the meeting being delayed until Monday.

The source noted that the issue has been "very politicized," as some have stated they think such a transaction would result in yet another "too-big-to-fail" scenario.

Still, ING's preferreds were on the rise.

The 8.5% perpetual hybrid capital securities (NYSE: IGK) were the most active of the complex, gaining 29 cents, or 1.16%, to $24.37. The 7.375% perpetual hybrid capital securities (NYSE: IDG) moved up 54 cents, or 2.38%, to $23.29.

Of the various issues, the 6.125% perpetual debt securities (NYSE: ISG) had the biggest percentage move, improving by 55 cents, or 2.81%, to $20.12.

Both ING and Capital One remain optimistic about the deal and have said they expect it to close within a few days of receiving Fed approval.

Regency issues active

Regency Centers' $250 million offering of 6.625% series 6 cumulative redeemable perpetual preferred stock freed to trade on Wednesday, according to sources. The deal priced Tuesday.

Once freed, the preferreds traded up to $25.05, a trader said before the bell.

Another market source saw the paper close at $25.04 and said its volume-weighted average price was $25.01.

"It did pretty well," he said. "Better than I thought it was going to do."

He added that volume was "pretty high," with about 1.7 million preferreds trading.

Also, Regency's 7.25% series 4 cumulative redeemable preferreds (NYSE: REGPD) - an issue that is being called with the proceeds raised from the new issue - was among the top trading issues of the day, with over 400,000 preferreds changing hands. However, the issue finished flat at $25.37.

The company intends to list the new preferreds on the New York Stock Exchange under the symbol "REGPF." Settlement is expected Feb. 16.

In addition to redeeming the 7.25% preferreds, Regency also intends to redeem the 7.45% series 3 cumulative redeemable preferreds. Additionally, Regency purchased all of the outstanding 7.45% series D cumulative redeemable preferred limited partnership units from its operating partnership.

Regency is a Jacksonville, Fla.-based real estate investment trust.

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