PNC Financial's new deal prices, gyrates; U.S. Bancorp eases on PNC launch; banks lose ground

By Stephanie N. Rotondo

Portland, Ore., April 19 - PNC Financial Services Group, Inc. announced a new preferred issue Thursday. That, along with U.S. Bancorp's recently priced deal, was taking up the majority of investors' attention.

"[PNC] was keeping everybody busy," one trader said.

After PNC's new deal was announced, it was instantly trading at a premium. However, by the end of the day, the issue had come back in to settle around par.

"It was very volatile," a market source said.

The new deal also put some pressure on U.S. Bancorp's recent deal, the $1.09 billion issue of 6% fixed-to-floating-rate series G noncumulative perpetual preferred stock.

"That came in a hair since the PNC announcement," a trader said.

Overall, the preferred stock market ended Thursday firmer than Wednesday. However, the most actively traded issues were trending more to the downside.

PNC new issue gyrates

PNC Financial Services Group priced a $1.5 billion offering of 6.125% fixed-to-floating-rate series P noncumulative perpetual preferreds on Thursday.

Price talk was originally 6.25% to 6.375%, according to a trader. After May 1, 2022, the rate will be Libor plus a spread.

Around midday, a trader quoted the paper at $25.25 bid, $25.35 offered in the gray market. However, by the end of business, it was seen at par bid by a market source.

"It was pretty high before," he said, noting that the preferreds had gotten as high as $25.30 bid before falling back, hitting a low of $24.95.

The source added that the volatility set in after it was learned how big the deal was going to be.

"Instead of setting the price talk tighter, they printed [more]," he said. "It does not appear to have been in as many long-term hands as people were expecting."

The preferreds have a liquidation preference of $100,000 each. They will be issued as $25.00 depositary shares each representing a 1/4,000th interest in a preferred.

PNC will apply to list the shares on the New York Stock Exchange under the ticker symbol "PNCPP."

Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and PNC Capital Markets LLC are the joint bookrunning managers.

Proceeds will be used for general corporate purposes, including the repurchase and redemption of outstanding PNC and subsidiary securities, including trust preferreds.

PNC is based in Pittsburgh.

U.S. Bancorp loses to PNC

PNC's monster new issue put pressure on U.S. Bancorp's newly priced $1.09 billion offering of fixed-to-floating-rate series G noncumulative perpetual preferreds.

A trader placed the issue at $25.40 around midday. After the bell, a market source said he had seen a $25.40 bid, but this source said the paper closed at $25.47. The volume-weighted average price was $25.41.

"There was very heavy volume," the source added, seeing nearly 4 million shares change hands.

Dividends will be fixed at 6% until April 15, 2017, at which time the rate will be calculated yearly at Libor plus 486.125 basis points.

The deal priced Tuesday and was instantly trading at a premium, hitting highs around $25.50.

The company will apply to list the preferreds on the NYSE under the ticker symbol "USBPN." Settlement is expected April 20.

Morgan Stanley, Goldman Sachs & Co. and U.S. Bancorp Investments Inc. are the joint bookrunners. Mesirow Financial Inc., Oppenheimer & Co. Inc., Raymond James & Associates Inc., RBC Capital Markets LLC and Stifel, Nicolaus & Co. Inc. are co-managers.

Proceeds will be used for general corporate purposes, including the redemption of the USB Capital XI 6.6% trust preferreds and the USB Capital XII 6.3% trust preferreds.

The 6.6% trust preferreds (NYSE: USBPJ) were the most active securities in the secondary realm, closing down a penny at $25.26.

U.S. Bancorp is based in Minneapolis.

Banks lose ground

Among other active issues in the secondary space, HSBC Holdings plc's 6.5% series H noncumulative preferreds (NYSE: HBAPH) closed down 2 cents at $25.27.

Royal Bank of Scotland Group plc's 5.9% noncumulative guaranteed trust preferreds (NYSE: RBSPE) were one of the day's biggest percentage losers, dropping 35 cents, or 2.48%, to $13.75.

Fifth Third Bancorp's 7.25% trust preferreds (NYSE: FTBPB) were also weaker, sliding 9 cents to $25.38.

Delphi Financial Group Inc.'s 7.376% fixed-to-floating-rate junior subordinated debentures due May 1, 2067 (NYSE: DFP), however, managed to inch up 2 cents to close at par.

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