Kilroy plans to sell preferreds; new issue market loaded; Wells Fargo, EOS plan redemptions

By Stephanie N. Rotondo

Portland, Ore., March 15 - March Madness was in full swing Thursday, which was taking focus away from trading in the preferred stock arena.

"Volume overall was pretty light," a market source said. As to the overall tone of the market, he said it "petered out towards the end."

Another trader said the market was "in the throes of the biggest new issue market ever." The primary market was again raging after being sidelined due to the recent release of stress test results.

One new issue was announced Thursday, a deal from Kilroy Realty Corp. The real estate investment trust said it plans to issue series G cumulative redeemable preferreds. Proceeds from the sale will be used, in part, to redeem another of the company's preferred issues.

In secondary trading, Wells Fargo & Co. said late Wednesday that it will redeem an old Wachovia Capital Trust issue. The redemption is part of the company's capital plan that was recently approved by the Federal Reserve.

Also being called is EOS Preferred Corp.'s last outstanding preferred issue. The security was touted as "an old piece of Lehman paper." Lehman Brothers Bank & Trust, an entity not part of the now-defunct investment firm's bankruptcy, owned the company.

Kilroy plans new issue

Kilroy Realty intends to sell series G cumulative redeemable preferred stock, the company said in a filing with the Securities and Exchange Commission Thursday.

Price talk is 6.875% to 7%, according to a trader. He added that 3 million shares are currently expected to come, but "I'm sure they'll grow it," he said, seeing a $24.78 bid in the gray market shortly before the market closed.

Another market source quoted the issue at $24.75 bid, $24.85 offered.

"It's kind of not doing so well," he said. "Not horrendous, but not doing so well."

Wells Fargo Securities LLC, Bank of America Merrill Lynch, Barclays Capital Inc. and J.P. Morgan Securities LLC are the bookrunners.

The preferreds become redeemable in 2017 or in the event of a change of control.

The company will apply to list the new preferreds on the New York Stock Exchange.

Proceeds will be used to redeem all of the company's 7.8% series E cumulative redeemable preferreds and for general corporate purposes, including the possible redemption of the 7.5% series F cumulative redeemable preferreds, acquiring properties and the repayment of outstanding debt.

The series Es (NYSE: KRCPE) fell 31 cents, or 1.2%, to $25.45, and the series Fs (NYSE: KRCPF) dipped just 4 cents to $25.26.

Kilroy is a Los Angeles-based REIT.

New issues keep crankin'

Kayne Anderson MLP Investment Co.'s $120 million offering of 4.25% series E mandatorily redeemable preferreds - an issue that priced Wednesday - was quoted at $25.02 bid, $25.12 offered.

A trader said that Colony Financial Inc.'s $130 million of 8.5% series A cumulative redeemable perpetual preferreds - which priced Tuesday - freed from the syndicate Thursday and were trading around par.

Also trading "right around par" was KKR Financial Holdings LLC's $100 million of 7.5% $25-par 30-year notes, the trader said.

AXIS Capital Holdings Ltd.'s $400 million issue of 6.875% series C noncumulative perpetual preferreds - a deal that priced Monday - was giving back a little bit, the trader continued. He quoted the paper at $25.15 bid, $25.25 offered.

Wells to redeem Wachovia paper

In an 8-K filed late Wednesday, Wells Fargo said it will redeem Wachovia Capital Trust IV's $875 million of 6.375% trust preferreds.

The trust preferreds (NYSE: WBPB) slipped 3 cents to $25.09.

The redemption will occur on April 13. Holders will receive 100% of par plus accrued dividends of about 13.3 cents, and the redemption will be funded with excess cash on hand.

A regularly scheduled distribution on March 15 will not be affected.

The redemption is consistent with Wells Fargo's plan to eliminate securities that no longer qualify as tier 1 capital. That plan also received approval from the Federal Reserve.

EOS calls series Ds

EOS Preferred's 8.5% series D noncumulative exchangeable preferreds (Nasdaq: EOSPN) rose $1.64, or 6.97%, to $25.15 in trading Thursday.

The gains came as the company's board - which recently approved the dissolution of the company - said it approved the delisting of the series D preferreds in connection with its plan to liquidate the company.

The delisting will occur at the same time as holders of the paper receive their final payout of par plus accrued dividends from Jan. 1.

The company also intends to liquidate the 8% series B cumulative nonconvertible preferreds.

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