Preferred market starts week sideways; new issues remain active; Santander falls on downgrade

By Stephanie N. Rotondo

Portland, Ore., April 30 - The preferred stock market was on the flat side Monday as players dealt with month-end activities.

"People are cleaning up their books, so to speak," a trader said.

Recent new deals were on the liquid side, but otherwise there was little in the way of liquidity, according to a market source.

A trader also noted that chatter out of a syndicate meeting last week in New York was that the new issue calendar will remain hot throughout the year.

"We're going to continue to see an active new issue calendar," he said, noting that he heard the market should get at least four to five new deals per month - including banks, which are expected to ramp up "at the end of this quarter."

In the secondary market, Banco Santander SA preferreds were weaker following a downgrade by Standard & Poor's. The rating change came after Spain's sovereign credit rating was cut Thursday. S&P also took negative rating action against 15 other Spanish banks.

New issues stay busy

In recent deals, PNC Financial Services Group, Inc.'s recent 6.125% fixed-to-floating-rate series P noncumulative perpetual preferreds lost about 20 cents on the day, according to a market source. The paper closed at $25.30.

U.S. Bancorp's 6.5% fixed-to-floating series G noncumulative perpetual preferreds (NYSE: USBPN) meantime inched up a penny to $25.80.

BB&T Corp.'s new 5.85% series D noncumulative perpetual preferreds - a deal that priced Thursday and freed from the syndicate on Friday - moved up 7 cents to trade near par, the source said.

"I still find that amazing," he said, given that the yield is below 6%.

Santander weakens on downgrade

Banco Santander preferreds were losing ground Monday as the bank received a downgrade from S&P.

"As a general rule, they were red," a source said, noting that volume in the name was not high.

The 10.5% series 10 noncumulative guaranteed preferred securities (NYSE: STDPE) dropped 6 cents to $26.16. The 6.5% series 5 noncumulative guaranteed preferred securities (NYSE: STDPC) were the biggest percentage loser, falling 47 cents, or 2.25%, to $20.45.

S&P on Thursday said that it cut Spain's sovereign credit ratings to BBB+/A-2 from A/A- with a negative outlook. That in turn resulted in negative rating actions for Spanish banks, including Santander.

"The sovereign downgrade has direct negative rating implications for the banks that we rate at or above the sovereign rating on Spain and on most banks whose ratings incorporate uplift over their 'stand-alone credit profiles' to reflect Spanish government support," the agency said in a press release.

Banco Santander's ratings were lowered to A-/A-2 from A+/A-1, and the outlook is negative.

"The negative outlooks on Santander ... mirror that on the long-term rating on Spain," S&P said in the release. "We believe that the magnitude we currently anticipate of potential lowering of their [stand-alone credit profiles] would likely not affect their respective long-term ratings. This is because we could possibly include a one-notch adjustment to reflect their stronger performance than peers, as it previously has been the case."

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