Midland Bank PLC, one of the biggest British banks, is marketing a $250 million issue of noncumulative preferred stock, according to market sources.

Merrill Lynch & Co. is lead manager of the deal, which is being marketed with a proposed dividend of 8.875%, according to the sources. Merrill Lynch declined to comment.

"The 8 7/8% yield will catch a lot of attention," said a capital markets source.

Retail Appeal Seen

Capital market sources said the issue is expected to have a strong appeal to retail investors because the preferred shares are likely to have an investment-grade rating and a yield of 275 basis points over the 30-year U.S. Treasury bond.

Midland's outstanding preferred shares are rated Baal by Moody's Investor Service, BBB-plus by Standard & Poor's Corp.

The bank's preferred stock dividend is subject to a 15% British withholding tax, but individual investors can offset that be getting a credit against their U.S. income tax.

The preferred issue will be priced this week, said market sources.

Midland is a subsidiary of HSBC Holdings, which is also the parent of Hongkong and Shanghai Banking Corp.

MBNA Offering

Elsewhere in the market, Newark, Del.-based MBNA Corp. issued $100 million of senior debt Monday with an unusual 10-year maturity. The underwritten medium-term notes were priced to yield 6.158%, or 72 basis points over the 10-year U.S. Treasury note.

The maturity of the deal was longer than typical for senior debt, which usually carries a maturity of five years or less. Subordinated debt, on the other hand, usually carries a maturity longer than five years because subordinated debt of shorter maturity doesn't fully count toward capital totals.

MBNA officials declined to comment.

Bear, Stearns & Co. lead managed the offering, with co-managers Goldman, Sachs & Co. and Lehman Brothers. The issue is rated A3 by Moody's and BBB-plus by Standard & Poor's.

In the private placement market, Den Danke Bank, Copenhagen, recently priced $200 million of 10-year subordinated debt. The issue, registered under rule 144A, will yield 6.556%, or 115 basis points over the 10-year U.S. Treasury note. J.P. Morgan Securities led the placement.

Moody's rated it A2; Standard & Poor's, BBB-plus.

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