Inland Real Estate heralds new issue plans; repack rumors circulate; bank preferreds weaken

By Stephanie N. Rotondo

Portland, Ore., Sept. 28 - The preferred stock market was "waiting for something to happen" Wednesday, according to a trader, whether that be news out of Europe or domestic news.

The overall market ended down "but not a lot," another market source said.

News of a new issue hit the tape as Inland Real Estate Corp. said it was planning to issue its first series of preferreds. Though the deal is expected to be small, a trader noted that new issue appetite is such that "it sounded like it was put away pretty easily."

Meanwhile, the market was continuing to buzz with rumors of a debt-repack into $25-par preferreds. But the details have been "sketchy," a trader said.

Of the day's goings-on, a market source said the actively traded issues were fairly evenly mixed between foreign and domestic banks, including Citigroup Inc., Bank of America Corp., Barclays plc and HSBC Holdings plc.

All the active bank issues traded down.

Inland to bring new issue

Inland Real Estate announced a new issue of series A cumulative redeemable preferreds on Wednesday.

Price talk is around 8.125%, and the issue size is expected to be at least $50 million. Pricing is expected Thursday.

There was little to no activity in the issue in the gray market. A trader said he had seen a less 42 bid early on but nothing after that.

"I'm not really sure where it's trading," he said.

Proceeds from the sale will be used for property acquisitions and general corporate purposes. The Oak Brook, Ill.-based real estate investment trust said that could include the repayment of debt.

Repack rumors swirl

The rumor mill continues to buzz about a potential debt-repack, according to a trader.

On Tuesday, a trader said he heard that Royal Bank of Canada was planning to "repack" bonds into $25-par preferreds.

"It was a popular product five years ago," the trader said. The repacks were typically sold to retail clients.

However, with the financial crisis of 2008 and the subsequent blow-up of Lehman Brothers, the products fell out of fashion. It did not help matters that a series of class-action lawsuits related to the products then followed.

The trader said he heard it was a small deal of just 1 million preferreds. However, he noted that it had a "decent coupon" of 6.7%.

On Wednesday, a trader at another shop said he heard the same rumor, though he deemed it "sketchy." He heard it was a Goldman Sachs Group, Inc. 40-year junior subordinated bond that was going to be repacked via UBS Investments. Price talk was 6.75% with five years of call protection.

The trader noted that there haven't been a lot of such products "since trust preferreds were allowed as tier 1 capital." Previously, the products were used to fill in retail demand, he said.

"A lot of those are still floating around, but they're really tiny issues," he said.

Banks active, down

A market source said the actively traded preferreds of the day were fairly mixed between European and U.S. banks.

Domestically, Citigroup, Bank of America and Ally Financial Inc. were the most actively traded securities. Citi's 8.5% fixed-to-floating trust preferreds (NYSE: CPJ) fell a penny to $24.89, while Bank of America's 8.2% series H depositary shares (NYSE: BACPH) closed down 2 cents at $22.33.

Ally's 8.5% series A preferreds (NYSE: ALLYPA) fell 15 cents to $19.12.

In foreign banks, HSBC Holdings' 8% exchangeable perpetual subordinated capital securities (NYSE: HCSPB) lost 9 cents, finishing at $25.45.

Barclays' 8.125% series 5 noncumulative callable dollar preference shares (NYSE: BCSPD) were one of the day's "bigger movers," a source said. The issue declined by 84 cents, or 3.53%, to $22.94.

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