Security Pacific's bond offering goes for naught.Security Pacific's bond offering goes for naught Security Pacific Corp.'s recent decision to redeem $225 million of its auction-rate preferred stock auction-rate preferred stock A type of floating-rate preferred stock for which dividend payments are determined at periodic auctions conducted by the issuer rather than by short-term interest rates. Compare remarketed preferred stock. in effect apparently will more than wipe out the capital raised in a Nov. 5 bond offering. The redemption, announced Nov. 26, affects nearly half of downtown Los Angeles-based Security Pacific's $525 million of auction-rate preferred stock, which offers investors a new, market-rate return on their investment every 49 days. The interest rates demanded by investors for auction-rate preferred have risen along with investors' concerns about the California real estate market and the national economy. The three series, Series B, Series C and Series D, will be redeemed on Jan. 4, Feb. 1 and Feb. 8, respectively, said Security Pacific spokesman Dave Garcia David Garcia (born September 15, 1920 in East St. Louis, Illinois) is an American scout for the Kansas City Royals and a former coach and manager in Major League Baseball who has spent over 65 years in the game. . EAch series has $75 million in preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. outstanding. The redemption comes less than a month after Security Pacific raised $150 million in a 10-year bond offering. SEcurity Pacific was forced to pay a dautingly high interest rate -- 11.54 percent -- to raise the funds. "The redemption is completely unrelated to the bond offering," Garcia said. Both the high bond price paid and the redemption are symptomatic of a bearish Bearish Words used to describe investor attitude. A bearish investor believes that a particular asset or the market as a whole will decline in value. bearish market for financial company debt and equity, said analysts and Garcia. "Right now, we feel there is too much supply in the market and the market cannot support that supply," Garcia said. "If we reduce the supply, the market conditions will improve for future actions." Security Pacific is not alone in its redemption policy. On Nov. 7, New York-based Citicorp, the nation's biggest bank, announced that it would redeem $265 million of its $950 million of auction-rate and remarketed preferred stock remarketed preferred stock A type of preferred stock in which the dividend rate is determined periodically by a remarketing agent. The agent resets the dividend rate so that the preferred stock can be tendered at par or resold at the original offering price. . And last week San Francisco-based Wells Fargo Wells Fargo armored carriers of bullion. [Am. Hist.: Brewer Dictionary, 1147] See : Protectiveness Wells Fargo company that handled express service to western states; often robbed. [Am. Hist. & co. announced that it would redeem all $180 million of its outstanding market auction preferred stock. First Interstate Bancorp First Interstate Bancorp was a bank based in the United States that was taken over in 1996 by Wells Fargo. It was headquartered in Los Angeles. The name has continued to be used in the banking world by used after the merger by First Interstate Bank who had been using the , based in downtown Los Angeles Downtown Los Angeles is the central business district of Los Angeles, California, located close to the geographic center of the metropolitan area. The sprawling, multi-centered megacity is such that its downtown core is often considered just another district like Hollywood or , redeemed its $150 million of auction rate preferred in January and February. Security Pacific's redemption comes as the bank was forced to pay an incresingly high interest rate for the funds. Series C cost the bank 6.96 percent when it was auctioned on Oct. 29, Series D 7.66 percent on Nov. 5 and Series B 7.97 on Nov. 19. Wells Fargo's move to redeem its stock came after it was forced to pay a 8.65 percent rate on its Series I stock last week. Analysts expressed little surprise at Security Pacific's move. "There isn't a bank that isn't doing it," said Michael abrahams, a banking stock analyst at Bateman Eichler, Hill Richards. "The risk is that it will get too expensive, and then it really looks bad." "I think it's a confidence move," said another analyst, Fritz fritz n. Informal A condition in which something does not work properly: Our television is on the fritz. [Perhaps from German Fritz Garrecht, of New York-based First Long Island Securities. "By redeeming the preferred stock, they are saying, 'we have enough confidence in ourselves to buy it back.' It builds back the confidence in the street and the community." |
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