Optimism about Greece puts financials on firmer footing; First BanCorp mixed on Moody's review

By Stephanie N. Rotondo

Portland, Ore., June 30 - The last day of the month, and the quarter, was a good one for the preferred stock market, traders reported Thursday.

"Everything just came back to life," a trader said. He noted that the firmer feel came from Greece "kicking the can down the road," referring to the country's austerity plan - which was approved Wednesday - and its renewed ability to access bailout funding.

"It was a pretty strong day, definitely more green than red," another trader said.

As is typical, the day's most actively traded name was Ally Financial Inc., which again traded higher. Traders also attributed Ally's gains to optimism about Greece.

"Risk-off trade has stopped, and everybody is pulling money back in," a trader said.

That optimism also poured over into European banks, particularly Royal Bank of Scotland Group plc and Barclays plc.

Meanwhile, Puerto Rican bank First BanCorp ended the day mixed amid light trading. Moody's Investors Service said it was considering upgrading the company's operating subsidiary, FirstBank Puerto Rico, due to its financing announced earlier in the week.

Optimism helps financials

As Greece voted to accept an unpopular austerity plan that cuts spending and raises taxes - thereby allowing it to access bailout funds from the European Union and the International Monetary Fund - investors are breathing easier.

With that relief comes a renewed interest in risk, a trader said, which is helping some names - like Ally Financial, RBS and Barclays - regain lost ground.

Ally's 8.5% series A preferreds (NYSE: ALLYPA) were the day's second most actively traded securities, taking a backseat only to its 8.125% series B (NYSE: ALLYPB) cousin.

The As gained 15 cents in Thursday trading, closing at $25.60 on volume of about 1.7 million preferreds. The Bs meantime earned 26 cents, re-breaking par to close at $25.03. About 2.4 million of the Bs turned over.

A trader remarked that RBS' series G paper (NYSE: RBSPG) was the third most active, with about 500,250 preferreds changing hands. They closed 21 cents higher at $14.75.

"A lot of the no-pays" have been moving around recently, the trader said. The series T preferreds (NYSE: RBSPT) in particular have gyrated around. On Thursday, the Ts fell off a bit in terms of volume, with just 63,000 preferreds trading. They finished 22 cents better at $18.79.

"People are wanting to jump in before the dividends get turned back on," the trader surmised. With the Greece debacle behind them, RBS paper has been deemed attractive at current price levels.

Meanwhile, Barclays' series D preferreds (NYSE: BCSPD) moved up 45 cents to close at $26.34.

In a surprising twist, National Bank of Greece SA's 9% series A preferreds (NYSE: NBGPA) dropped almost a dollar to close at $9.04. Nearly 300,000 preferreds changed hands.

First BanCorp mixed on review

First BanCorp's preferreds were mixed following news that Moody's Investors Service might upgrade the San Juan, Puerto Rico-based company's bank subsidiary.

The series A preferreds (NYSE: FBPPA) gained a nickel to close at $17.80, while the series Bs (NYSE: FBPPB) dropped 50 cents to $17.80.

Trading, however, was thin.

"They are all small issues," a trader said. "It's pretty illiquid, I would presume."

Moody's said the possible upgrade was due to a financing plan announced earlier in the week that would result in the bank having capital ratios in excess of those required by its regulator and well-capitalized minimums.

On Tuesday, the bank announced that it had secured a $175.5 million investment from two funds managed by Oaktree Capital Management LP.

The investor will purchase common stock at $3.50 per share, which was 12 cents less than Monday's closing share price of $3.62 (NYSE: FBP). The purchase will represent about 24.9% of the bank's outstanding common equity.

The deal is similar to a $180 million stock purchase agreement forged between the bank and Thomas H. Lee Partners last month. That investment also involved a 24.9% stake.

Additionally, First BanCorp has inked deals with other investors for another $164 million of funding. That brings the total new capital to nearly $520 million, well over what it needed to allow the Treasury Department to convert its $424.2 million of series G mandatorily convertible preferred stock into common shares.

Once that is accomplished and the Treasury sells its stake back to the company, the bank will once again be privately held.

The question now is if and when the company might begin to make dividend payments again. The payments were halted in 2009.

"Any move up is in anticipation of them reinstating the dividend," a trader said, noting that most of the preferred issues were noncumulative.

First BanCorp has not returned calls to Prospect News.

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