Qwest brings $500 million 7% $25-par notes; HCP heralds call, preferreds falter; REITs active

By Stephanie N. Rotondo

Portland, Ore., March 22 - It was a "red day" for preferred stocks on Thursday as they followed the downward trend of the common stock market.

"It was a mostly red day," a market source said. "It kind of peaked up right at the end."

In primary dealings, Qwest Corp. priced its previously announced offering of $25-par 40-year notes. The deal was doubled in size to $500 million from $250 million, and a source said that because of the increase, gray market prices started to come in a bit.

In the secondary arena, HCP Inc.'s preferred securities were tapering off after the company called two of its preferred issues. The company intends to fund the call with a public sale of common shares.

While trading in the HCP issues was thin, other real estate investment trusts such as Public Storage and First Industrial Realty Trust Inc. made the day's most active list.

Qwest doubles notes sale

Qwest priced a $500 million issue of 7% $25-par notes due April 1, 2052 on Thursday.

The deal was originally announced Wednesday and came at the low end of price talk.

Just after mid-day, a trader said he saw the notes trading at a less 13 cents bid in the gray market, or $24.87.

But after the bell, a market source said the deal was "not doing so well once they doubled the size of it. The price just backed right up. Go figure."

He said the issue closed at $24.85 bid, $24.90 offered - unchanged to slightly lower from the previous session - but added that the notes traded lower earlier in the day.

The notes (Baa3/BBB-/BBB-) are non-callable for five years.

The company will apply to list the notes on the New York Stock Exchange. Settlement is expected April 2.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunners. The lead manager is RBC Capital Markets. The co-managers are Raymond James & Associates Inc. and U.S. Bancorp Investments Inc.

Proceeds will be used, together with available cash or additional borrowings available under CenturyLink, Inc.'s revolving credit facility, to repurchase two series of debt securities for a purchase price of up to $500 million under a tender offer, Qwest said in a prospectus filed with the Securities and Exchange Commission.

Qwest is a Monroe, La.-based telecommunications company and a subsidiary of CenturyLink.

HCP weakens on call

HCP, a Long Beach, Calif.-based health-care REIT, announced it will redeem all of its outstanding 7.25% series E cumulative redeemable preferreds as well as its 7.1% series F cumulative redeemable preferreds.

The redemption will be funded via a public offering of 9 million common shares. The redemption is expected to cost $295.5 million.

The news did little to boost the preferreds. The Es (NYSE: HCPPE) fell a quarter to $25.08, and the Fs (NYSE: HCPPF) dropped 11 cents, also closing at $25.08.

Trading was limited in both issues.

REITs have busy day

Other REITs were getting investors' attention, however.

Public Storage's 6.625% series M cumulative preferreds (NYSE: PSAPM) had over 1 million shares change hands, though the paper was flat at $25.02. The Glendale, Calif.-based company said March 5 that it will redeem all $476.63 million of the preferreds on April 11.

Also, First Industrial's 7.25% series J cumulative preferreds (NYSE: FR-PJ) were active, falling a nickel to $23.69.

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