Midday Commentary: Preferreds 'barely up'; CHS planning new issue via BofA, Wells Fargo

By Stephanie N. Rotondo

Phoenix, Feb. 12 - A preferred stock trader said the market was "grinding tighter" on Wednesday, though he added that it was "not on large volume and not in a big way."

"Everything is just barely up," he said.

As of midday, the Wells Fargo Hybrid and Preferred Securities index was up 6 basis points.

CHS Inc. said late Tuesday that it was planning an offering of up to $250 million series 2, class B cumulative redeemable preferreds. One trader wondered how that deal might fare, considering how its 7.875% series 1, class B cumulative redeemable preferreds did when issued in September of last year.

The trader said the shares were "mispriced" at 7.875%, as the securities "immediately traded up to $28.00."

On Wednesday, the issue (Nasdaq: CHSCO) was trading off 6 cents at $28.93.

BofA Merrill Lynch and Wells Fargo Securities LLC are leading the new deal.

As for other recent deals that have yet to list, Diana Shipping Inc.'s $60 million of 8.875% series B cumulative redeemable preferreds were seen at $24.40 bid.

"It's just a small name that not a lot of people are going to be covering," a trader said of the deal's poor showing.

The issue priced Monday.

Sector peer Seaspan Corp. meantime saw its $125 million of series E cumulative redeemable preferreds trading at $24.75 bid.

A trader opined that the bid could be coming from a manager.

The preferreds priced on Thursday.

Citigroup Inc.'s $480 million of 6.875% series L noncumulative perpetual preferreds - a deal that came a week ago - were quoted at $24.65 bid, $24.70 offered, while Verizon Communications Inc.'s $500 million of 5.9% $25-par notes due 2054 were seen at $24.80.

Verizon came Jan. 30 and still has yet to be assigned a temporary reporting symbol on Bloomberg, a trader said. However, he speculated that both Verizon and Citigroup could list as early as Friday, though he expected it would more likely be next week.

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