Endurance issue prices, does 'very well'; trader sees upside in U.S. Cellular; RBS declines

By Stephanie N. Rotondo

Portland, Ore., May 24 - The big news of the day in the preferred stock market was a new issue from Endurance Specialty Holdings Ltd. The Bermuda-based insurance company said early on in the day that it intended to sell preferred stock and pricing came before the bell.

The deal came upsized and at the rich end of price talk originally set in the 7.625% area; the dividend was set at 7.5%.

Overall the preferred market closed "mixed" to "off slightly," according to a market source on Tuesday.

Royal Bank of Scotland Group plc's preferreds drifted lower after Moody's Investors Service said it was placing the bank - along with 14 other United Kingdom banks - on review for possible downgrade.

A market source noted that the review did not include the preferreds, but added that "it doesn't mean the preferreds didn't move in sympathy."

Endurance deal doing well

Endurance Specialty Holdings brought a $230 million issue of 7.5% non-cumulative series B perpetual preferreds on Tuesday.

The market had originally been expecting $150 million and price talk was originally in the 7.625% area. Included in the final $230 million total was the exercise in full of the $30 million greenshoe.

Ahead of pricing, a trader opined that "they should cut the [dividend] and increase the size," as the shares were trading at par even before they officially priced.

"It was doing very, very well," a trader said. "A lot of people like it."

Another source said the deal was "going quite well," seeing a $24.98 bid, $25.03 offered quote in the gray market.

"That's indicative of a very well underwritten issue," he said.

Trader: U.S. Cellular winning

A trader said that United States Cellular Corp.'s recent $300 million issue of 6.95% senior notes due 2060 was one to watch.

"I like it a lot," he said of the $25-par bonds (NYSE: UZA).

The deal originally priced May 9.

The notes gained a penny during Tuesday's session, closing at $24.94. The trader opined that "it's going to trade higher."

RBS dips on review

Royal Bank of Scotland's preferreds all traded down after Moody's Investors Service said it was one of 14 U.K. banks that were being reviewed for possible downgrade.

The review was more debt-based than preferred related, but a market source noted that "it doesn't mean the preferreds didn't move in sympathy."

The source said RBS paper was down about 10 cents on average. The series M preferreds (NYSE: RBSPM) fell 21 cents to $18.27, while the series Ts (NYSE: RBSPT) dipped 7 cents to $20.27.

As previously reported, one preferred trader thinks that RBS is "a potentially interesting story." On Tuesday, the market source agreed with that assessment.

"I think they've hit their worst from a credit perspective," he said. Though parts of its business still have some issues, most of those parts are areas that RBS is planning to get out of. Its ongoing businesses, however, "seemed to have turned a corner.

"The foundation has been laid for it to improve," the source said.

Still, investors need to do their homework before buying specific pieces of paper, the source said, as RBS is still dealing with must-pay/might-pay issues.

Active names mostly higher

Of the day's most active preferreds, Citigroup Inc.'s series N preferreds fell a nickel to $28.02, on about 823,000 shares trading.

Ally Financial Inc.'s 8.5% series B preferreds meantime gained 2 pennies, closing at $26.44.

About 346,000 shares changed hands.

And, Goldman Sachs' series F preferreds ended 2 cents higher at $24.77.

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