Calls get most of investor focus; Zions pays back TARP, falls anyway; Digital Realty prices

By Stephanie N. Rotondo

Portland, Ore., March 29 - The preferred stock market ended down Thursday on what was "not really a busy day," a market source said.

However, in the secondary realm, there were three issues that were trading on the active side, all of which have been called by their respective issuers. The busy securities were Wachovia Corp.'s 6.375% trust preferreds, PNC Financial Group Inc.'s 6.125% trust preferreds and Comcast Corp.'s 7% $25-par notes due 2055. The first two were trading higher, while the latter was flat on the day.

Also in the secondary, Zions Bancorp said Thursday it had repaid 50% of the funds it received in federal bailout funds. The bank's preferreds were also on the busier side but traded down - something that surprised one source.

In the primary, new deals were taking a bit of a breather after getting most of the attention over the course of the week.

Digital Realty Trust Inc. priced its previously announced offering of series F cumulative redeemable preferreds. The deal was increased to $175 million from $100 million.

American Capital Agency Corp. also priced a deal. Late in the day, the company said it was selling $150 million of 8% series A cumulative redeemable preferreds.

Neither the Digital Realty deal nor the American Capital deal seemed to be holding up well.

Called issues take focus

Of the day's top five most actively traded listed issues, three were issues that are being redeemed, a market source said.

He called the action a "recycling of the investor base."

Wachovia's 6.375% trust preferreds were the most actively traded. About 2.55 million of them turned over. The trust preferreds (NYSE: WBPB) inched up a penny to $25.12.

Wachovia's parent company, Wells Fargo & Co., said March 15 that it intended to redeem the securities on April 13.

PNC's 6.125% series D trust preferreds (NYSE: PNU) were also active, with nearly 941,000 shares changing hands. The issue gained 2 cents, closing at $25.16. PNC announced the April 25 redemption on March 22.

And Comcast's 7% $25-par notes (NYSE: CCW) were flat, a source said, at $25.15. The cable company announced the April 20 redemption on March 19.

Zions dips despite payback

Zions Bancorp, a Salt Lake City-based bank holding company, said Thursday that it had repaid $700 million, or 50%, of the Troubled Asset Relief Program funds received during the financial crisis.

The 9.5% series C noncumulative perpetual preferreds (NYSE: ZBPC) made the day's most active list, but the preferreds were down 4 cents at $26.16.

"I'm surprised it's not up," a market source said.

The company said it redeemed its fixed-rate series D cumulative preferreds after a "thorough review" by the Federal Reserve.

The company said in a statement that it expects to repay the remainder of the TARP funds by the end of the year.

Digital Realty prices

Digital Realty Trust brought a $175 million offering of 6.625% series F cumulative redeemable perpetual preferred stock on Thursday.

The deal came at the low end of price talk and was upsized from $100 million.

"It should be doing well," a trader said before the close. He quoted the issue at $24.77 bid, $24.80 offered in the gray market.

After the bell, a market source placed the paper at $24.75 bid, $24.80 offered.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and Wells Fargo Securities LLC are the joint bookrunning managers.

Digital Realty will apply to list the new preferreds on the New York Stock Exchange under the ticker symbol "DLRPF." Settlement is expected April 5.

Proceeds will be contributed to the company's operating partnership, which will then use the funds to temporarily pay down borrowings under a global revolving credit facility, to acquire additional properties, to fund development and redevelopment opportunities and for general corporate purposes, including the possible repurchase or redemption of outstanding debt or preferreds.

Digital Realty is a San Francisco-based real estate investment trust focused on data center and technology buildings.

American Capital deal fizzles

American Capital Agency announced a sale of $150 million of 8% series A cumulative redeemable preferreds on Thursday.

The deal came at the low end of talk.

"There's not much happening on it," a source said around midday. "It seems like it's going to be a small deal."

He pegged the preferreds at $24.70 bid in the gray market.

Another market source said the issue had "been very slow to develop. Nothing is really trading."

Citigroup, UBS Securities LLC and Wells Fargo are the joint bookrunners. RBC Capital Markets, LLC and Stifel, Nicolaus & Co., Inc. are joint lead managers. Barclays Capital Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Sterne, Agee & Leach, Inc. and Wunderlich Securities are the co-managers.

American Capital will apply to list the preferreds on the Nasdaq Global Select Market under the ticker symbol "AGNCPA."

Proceeds will be used to acquire additional agency securities as market conditions warrant and for general corporate purposes.

American Capital is a Bethesda, Md.-based REIT that invests in agency passthrough securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity. The company is externally managed and advised by American Capital AGNC Management, LLC, an affiliate of American Capital, Ltd.

New issues rage in Q1

A market source said he was gearing up to close out the new issue calendar for the quarter and said that so far, it's been a good year for primary dealings.

For the quarter, he said, new issuance was about $11.7 billion, with $1.25 billion of that done outside of the United States.

"What's crazy about it is that most of it is REITs," he said. "There's a whole host of these guys that I've never even heard of before."

He noted that the amount of REIT new issues signified how high demand was for such products.

Additionally, he said that about one-third of new issuance was in the $1,000-par market, also a "good health indicator of the market."

Looking forward, he expects the trend of high new issuance to continue, barring any unforeseen catastrophes.

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