Arch Capital's new issue trades well; Digital Realty issue holds in; secondary market sees red

By Stephanie N. Rotondo

Portland, Ore., March 30 - Preferred stocks ended the week "flat to down a couple cents" in "so-so" trading, according to a market source.

However, the source noted that among the "more liquid stuff, there was far more red than green."

As for the lackluster tone of the day, a trader opined that investors were "taking a breath because we have had so much new issue business."

According to one source, total preferred issuance for the quarter, including all dollar-denominated issues and deals done outside the United States, was $12.08 billion.

"That's pretty healthy," he said. On an annualized basis, that comes to more than $48 billion.

"That's certainly well below 2007 and 2008," he said. "But those were artificially high."

Recent deals continued to hold in pretty well. Arch Capital Holdings Ltd.'s $325 million 6.75% series C noncumulative preferreds neared $25.50, and Digital Realty Trust Inc.'s $175 million of 6.625% series F cumulative redeemable preferreds continued to hold in just under par.

Arch Capital trades higher

Arch Capital's $325 million offering of 6.75% series C noncumulative preferred shares continued to perform well come Friday.

The deal priced Monday and quickly traded at par or above. Friday trading was no different. Market sources saw the paper inching ever closer to $25.50.

Before the bell, a trader placed the issue at $25.40. After the bell, a source saw the preferreds at $25.42 bid.

The company intends to use proceeds from the sale to redeem its 7.875% series B noncumulative preferreds and 8% series A noncumulative preferreds.

Arch Capital will apply to list the new preferreds on the New York Stock Exchange under the symbol "ARHPC."

Wells Fargo Securities LLC, Bank of America Merrill Lynch, Morgan Stanley & Co. LLC and UBS Securities LLC were the bookrunners. Barclays Capital Inc. and J.P. Morgan Securities LLC were the senior co-managers. Co-managers were BNY Mellon Capital Markets LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and U.S. Bancorp Investments Inc.

Arch Capital Group is a Hamilton, Bermuda-based reinsurance company.

Digital Realty holds in

San Francisco-based Digital Realty Trust's $175 million of 6.625% series F cumulative redeemable perpetual preferred stock was holding up below par, a trader said.

The deal priced Thursday.

Shortly before the end of business on Friday, the trader saw the securities trading at $24.70.

"I thought it would be higher than that," he said.

He also noted that, as of midday, the new issue had yet to free from the syndicate, although it had been assigned a temporary trading symbol.

Digital Realty will apply to list the new preferreds on the NYSE under the ticker symbol "DLRPF."

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley and Wells Fargo were the joint bookrunning managers.

Proceeds will be contributed to the company's operating partnership, Digital Realty Trust, LP, which will then use the funds to temporarily pay down borrowings under a global revolving credit facility, to acquire additional properties, to fund development and redevelopment opportunities and for general corporate purchase, including the possible repurchase or redemption of outstanding debt or preferreds.

Secondary market bleeds

In secondary trading, a market source said the more actively traded issues were "far more red than green."

Ally Financial Inc.'s 8.125% trust preferreds (NYSE: ALLYPA) fell 14 cents to $23.11, with over 1 million shares turning over.

HSBC Holdings plc's 8% exchangeable perpetual subordinated capital securities (NYSE: HCSPB) meantime lost 9 cents, closing at $27.31.

Citigroup Inc.'s 8.5% fixed-to-floating trust preferreds (NYSE: CPJ) - which have been on the more active side of late - were also weaker, dropping 6 cents to $25.60.

And Nexen Inc.'s 7.35% $25-par subordinated notes due 2043 (NYSE: NXYPB) closed flat at $25.30.

On the upside were Royal Bank of Scotland Group plc's 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT), which gained 12 cents, finishing at $19.00.

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