Talk of Greek, U.S. debt plans boost market; European banks gain ground; PNC new deal at par

By Stephanie N. Rotondo

Portland, Ore., July 21 - Preferred stocks experienced "a bit of an uptick" on Thursday as European leaders were reported to be nearing a deal on Greece and rumors were circulating that the United States was inching closer to a deal on the debt ceiling.

"People think they are getting closer to containing the contagion," one trader said regarding the Greece deal.

Shortly after the close, breaking news hit the wires: There was in fact a Greece deal inked. However, despite the rumors, sources from both sides of the U.S. congressional aisle said they had not yet come to terms on a deal.

Still, the news percolating from Europe gave European banks yet another leg up, and Royal Bank of Scotland Group plc paper was up as much as 10% on the day.

In the new issue realm, PNC Financial Services Group, Inc. priced a $1 billion preferred issue late Wednesday. By Thursday's close, the securities were seen trading "largely in a narrow window," according to a market source.

Also, Public Storage's new 6.35% series R cumulative preferreds were seen inching ever closer to par, which a trader said was "good for what that deal was."

RBS, Euro banks gain

Chatter of a potential plan to ease Greece's debt burden helped European banks like Royal Bank of Scotland head into higher territory, traders reported.

"All Euro banks are up," a trader said.

RBS' series G preferreds (NYSE: RBSPG) were one of the day's most actively traded issues, with nearly 657,000 preferreds turning over. They closed $1.23, or 9.99%, higher at $13.50.

"That was a huge positive," a market source said.

The Es (NYSE: RBSPE) were also busy, closing up $1.39, or 11.47%, at $13.51.

National Bank of Greece SA's 9% series A preferreds (NYSE: NBGPA) got a boost on the buzz, ending 41 cents, or 5.10%, stronger at $8.45.

And Barclays plc's American Depositary Shares (NYSE: BCSPA) inched up 42 cents, or 1.75%, to $24.47.

Within minutes of the bell, news outlets began reporting that European leaders had in fact inked a deal that would help to reduce Greece's sovereign debt, thereby caging the so-called "Euro-contagion."

Greece will receive a new bailout package of €109 billion. The International Monetary Fund, along with the private sector, will participate in the deal. Private investors are being encouraged to swap their old debt for new, and a discounted repurchase program is also being considered.

Additionally, the interest rates on the bailout funds will be cut and the maturity extended.

The plan might also result in a "selective default" for the country.

European banks with exposure to Greece - as well as to Spain, Portugal, Italy, Ireland and Germany - came under pressure as investors attempted to discern how much exposure there was and how negatively a Greek default might impact the system. RBS in particular was knocked down pretty hard in after-hours trading.

Investors will get a chance to see just how much exposure RBS has when it releases interim quarterly results on Aug. 5.

PNC's new deal around par

PNC Financial Services priced a $1 billion public offering of depositary shares each representing a 1/100th interest in a share of series O fixed-to-floating-rate non-cumulative perpetual preferred stock late Wednesday.

The preferreds will bear interest at 6.75% through Aug. 1, 2021. At that point, the interest rate will change to Libor plus 367.8 basis points.

By Thursday's close, a market source said the preferreds were trading "largely in a narrow window right around par." He said the paper hit a low of 99.6 and a high of 102.528.

The Pittsburgh-based financial services company announced the deal early in Wednesday's session, and traders were nearly jubilant on the news.

"This is huge news in our market," a trader said, as the deal marked the first public preferred sale by a bank in nearly three years.

Public Storage hits par

Also in new issues, Public Storage's new $425 million issue of 6.35% series R preferreds was "hanging right at par," a trader said.

The preferred had been trading in the upper-$24.90s previously.

Another market source placed the issue at par.

The Glendale, Calif.-based real estate investment trust brought the deal late Tuesday, selling 17 million depositary shares in an oversubscribed offering.

Proceeds will be used, in part, to take out the company's series K preferreds.

Genworth hybrids fall

A trader said Genworth Financial Inc.'s 6.15% hybrid notes due 2066 were among the day's most actively traded junk issue and that the paper lost 3 points to close around 62.

The losses came as the Richmond, Va.-based insurance holding company reported preliminary second-quarter results.

The numbers were published late Wednesday.

For the quarter, Genworth said it was expecting a loss of $92 million to $112 million, due in part to the company's efforts to boost its capital reserves by $300 million.

In the second quarter of 2010, Genworth reported a net income of $42 million, or 8 cents per diluted common share.

At the end of the quarter, the company had $667 million of cash and highly liquid securities after retiring $548 million of debt - including preferred stock - during the quarter.

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