Preferreds off to rough start in fourth quarter; banks slammed as economic fears gain strength

By Stephanie N. Rotondo

Portland, Ore., Oct. 3 - Preferred stocks were "getting smushed," a trader said Monday.

"It's another bad day on Wall Street," he said.

"It's not so pretty," said another trader.

By no surprise, banks were taking the biggest hit.

"Domestics are holding on decent, comparatively," the second trader said. However, he noted that Bank of America Corp. issues were "down sharply." The bank's various preferred issues were dominating trading.

Despite the less-than-stellar market environment, STAG Industrial Inc. announced plans for a new issue on Monday. The deal is expected to be small, and traders had not heard many details about the offering.

Europe concerns pressure banks

Fears that Greece will likely default on its debt - the country reportedly will not reach its deficit reduction goals this year despite its recent austerity measures - resulted in investors putting pressure on banks on concerns about their exposure to the country and Europe.

Domestically, Bank of America preferreds were taking it on the chin.

The 8.625% series 8 noncumulative preferreds (NYSE: BMLPQ) fell 41.16, or 5.25%, to $20.93, while the 8.2% series H depositary shares (NYSE: BACPH) dropped $1.12, or 5.09%, to $20.90.

Citigroup Inc.'s 8.5% fixed-to-floating trust preferreds (NYSE: CPJ) were also down, but not nearly as much as Bank of America. The issue lost 30 cents, or 1.2%, to close at $24.80.

Among foreign issues, Royal Bank of Scotland Group plc's 6.6% series S noncumulative dollar preference shares (NYSE: RBSPS) were among the most actively traded securities. They lost 71 cents, or 6.39%, to close at $10.40.

But it was RBS' 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG) that lost the most, declining 98 cents, or 11.56%, to $7.50.

ING Groep NV was also losing value rapidly. Its 7.375% perpetual hybrid capital securities (NYSE: IDG) fell $1.22, or 6.38%, to $17.90.

STAG plans new issue

STAG Industrial announced plans to sell series A cumulative redeemable preferreds on Monday.

A trader said that the issue is expected to be a maximum of $57.5 million.

The deal did not price Monday, and traders had not heard much about the real estate investment trust's offering by market's close.

Bank of America Merrill Lynch is the bookrunner. Proceeds will be contributed to the company's operating partnership, which will then use the funds for acquisitions, to repay debt and for other general corporate purposes.

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