Stocks: A Rebounding First Union To Issue $2B Of Securities

First Union Corp. filed a shelf registration form Thursday with the Securities and Exchange Commission to issue $2 billion of securities.

First Union said it plans to issue debt, common stock, preferred stock, depositary shares, and warrants and would use proceeds to reduce debt, invest at the holding company level, extend credit to operating subsidiaries, and fund acquisitions and stock repurchases.

The registration comes as market confidence in First Union begins to rebound.

Mary Eshet, a spokeswoman for First Union, said that "there was no magic to the timing" of the shelf registration. First Union registered a similar shelf in 1997 for $2 billion, and the banking company's latest issue of $800 million in debt used up most of the existing shelf, she said. "We did another shelf so that we continue to have the flexibility to access the capital markets at opportune times," she said.

Since hitting a 52-week low of $29.4375 a week ago, the company's shares have risen almost 6%, thanks in part to a bullish report issued Wednesday by Lehman Brothers & Co. ING Barings of New York and Raymond James & Associates of St. Petersburg, Fla., upgraded the company in January. Analysts, however, have not raised their estimates, according to First Call/Thomson Co.

The fixed-income market also has become more optimistic about the Charlotte, N.C., banking company. The company's $800 million of debt securities sold well in February, according to bond traders.

"The bond market is receptive to First Union's story, in spite of some modest earnings disappointments," said Jay Weintraub, a bond analyst at Merrill Lynch & Co. "The bond market is willing to overlook these factors, which are likely transitory."

In the equity market on Thursday, U.S. Bancorp of Minneapolis hit a 52-week low of $17.125 as investors worried about the company's earnings growth. Shares of the company fell 50 cents, or 2.8%, to $17.125, as analysts pointed out that the company's earnings growth is slowing because of higher expenses.

"U.S. Bancorp is going through growing pains," said Lori Appelbaum, an analyst at Goldman Sachs Group. "Although the company's revenue growth is improving, it must build their infrastructure as the company grows."

Bank stocks in general sold off sharply as investors took profits from Wednesday's rally and caught a case of interest-rate-hike jitters. The American Banker index of 50 largest banks fell 0.7%, and the index of 225 banks fell 1.6%.

"Investors are taking profits in front of the employment report," which is due today, said Adam J. Lewis, senior vice president and trader at Keefe, Bruyette & Woods Inc.

If the employment report shows signs of inflation, it could motivate an interest rate hike from the Federal Reserve.

Banks stocks are holding up well, Mr. Lewis said, especially considering First Tennessee National Corp.'s recent earnings warning and investors' concerns about U.S. Bancorp's "soft first-quarter numbers."

"Bank stocks really could have gotten killed," he said. "The fact that they were not shows that much of the real bad news is already in the stocks."


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