National Westminster Bank PLC has delayed the launch of its planned issue of exchangeable capital securities, as the market for preferred stock of foreign companies has become saturated.
The British bank had wanted to issue at least $200 million and as much as $500 million of the exchangeable securities during the past two weeks, but will delay the issue until investor demand permits better pricing.
A call to a Natwest official was not returned by press time.
The securities are structured to start as debt, counting as Tier 2 capital, and can be exchanged into preferred stock to count as Tier 2 capital.
Recent preferred-stock issues by British companies Midland Bank PLC and Carlton Communications are trading below their issue price. making underwriters less willing to offer Natwest the pricing it desired, said capital markets sources.
Midland issued $250 million of preferred stock with an 8 7/8% dividend at $25 a share in late September, but the stock was being bid at around $24.375 last Friday afternoon, and Carlton's issue was quoted at $24.25 bid, compared with a $25 issue price.
A regulatory filing last Friday by Barclays Bank PLC for up to $500 million of exchangeable securities or preferred stock will not help the market, said one preferred-stock specialist. Investors are likely to demand better prices, knowing that more supply is coming.
In addition, market sources said Natwest apparently wants to launch an issue of $500 million in one shot.
"To quote Natwest, if $500 million is there, then yes, they will be in the market this year," said a source.
Telegraphing a preferred-stock issue of that size to the market will push up Natwest's cost. Issuers typically start with smaller offerings, which they can price at lower cost, and increase the size if demand can be drummed up, said sources.
Barclays Bank will almost certainly issue convertible capital securities rather than straight preferred stock, said Brian Worsley, deputy group treasurer
He said it was "possible" Barclays would issue in the current quarter if conditions in the preferred market improve. He added the bank would likely start with a smaller issue than the entire $500 million it registered.
Separately, Chase Manhattan Bank last Friday issued $100 million of 15-year subordinated notes.
