Primary swells with deals from Qwest, Pebblebrook; foreign banks rebound as fears alleviated

By Stephanie N. Rotondo

Portland, Ore., Sept. 14 - The preferred stock market was positive in tone on Wednesday as investor confidence improved due to hope that Europe will be able to manage its fiscal woes.

But the big news of the day was a $500 million new issue from Qwest Corp. The $25-par senior notes priced shortly after midday at 7.5%. The market had expected an issue size of $250 million.

Though traders reported that the deal was well received, there was also a bit of surprise that the coupon didn't price lower or that the amount wasn't increased more.

Among other new issues, Pebblebrook Hotel Trust's recently announced deal also priced and was faring reasonably well pre-pricing.

With European fears somewhat alleviated by encouraging comments made by leaders of France and Germany, foreign banks like Barclays plc, Deutsche Bank AG and ING Groep NV headed for higher ground. Still, there remained concern that Greece might not be able to avoid a bankruptcy, so there were "more of the same concerns," a trader said.

"It's just looking bad, but they are doing a good job of containing it," he said. "For now."

Qwest deal performs well

Monroe, La.-based telecommunications provider Qwest priced an issue of 7.5% $25-par senior notes, offering double what the market had previously been expecting.

Still, a trader said he was "very surprised," as a rumor had been circulating that the coupon would be lower and that the amount offered - $500 million - could have been much more.

Shortly before the deal even priced, however, a trader said it was "doing well," seeing a $24.80 bid.

"If they come in at 7.5%, it's going to jump," he opined.

Sure enough, within minutes of pricing, the notes were trading at $24.77 bid, $24.85. By the end of the day, a trader saw the notes at $24.85 bid, $24.87 offered.

Pebblebrook prices new issue

Before pricing, Pebblebrook's offering of series B cumulative redeemable preferreds had a market of $24.70 bid, $24.90 offered, a trader said around midday on Wednesday.

"It should price today," he said. "But they may not want to bring it in the wake of the Qwest deal." He noted that there was hardly any activity in the name, however.

But the deal did in fact come as a $75 million offering of 8% preferreds.

One trader remarked that he found the deal "surprising," because Raymond James & Associates, Inc. was one of the bookrunners.

"Raymond James doesn't manage many deals themselves," he said.

Pebblebrook is a Bethesda, Md.-based real estate investment trust.

Elsewhere in new issues, Digital Realty Trust's 7% series E cumulative redeemable preferreds - a $250 million issue that priced Sept. 8 - continued to gain traction, according to a trader.

He saw the securities offered at $24.98.

Foreign banks fall, rebound

Buoyed by confidence that the European Union might be able to stem its financial crisis, foreign banks were boosted by the end of business on Wednesday.

Most of the banks' preferreds had begun the day in the red.

"Foreign banks are up on hope they are going to get their [act] together in Europe," a trader said. He noted that chatter that China might be willing to buy up some of the debt also helped.

Barclays' 7.1% series 3 non-cumulative callable dollar preference shares (NYSE: BCSPA) closed up 61 cents, or 2.96%, at $21.19. The issue had fallen as low as $20.60 in intraday trading.

The 8.125% series 5 non-cumulative callable dollar preference shares (NYSE: BCSPD) meantime rose 33 cents, or 1.45%, to $23.38, versus the intraday low of $22.97.

Among Deutsche Bank's securities, the 8.05% trust preferreds (NYSE: DKT) were the most active. The paper inched up 26 cents to $24.86, up from the day's low of $24.59.

ING's 8.5% perpetual hybrid capital securities (NYSE: IGK) finished up 62 cents, or 2.78%, at $22.89. At one point, the securities traded as low at $22.08.

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