Allstate brings upsized preferred deal; Citigroup busy, mixed; Fannie, Freddie head higher

By Stephanie N. Rotondo

Phoenix, Sept. 23 - Preferred stocks were "holding in well," a trader said Monday.

By the end of business, the Wells Fargo Hybrid and Preferred Securities index was down 8 basis points, or 2 cents per share on average for $25.00-par shares.

The primary market was continuing to show signs of life as the Allstate Corp. announced plans to sell at least $200 million of series C fixed-rate noncumulative perpetual preferreds.

Price talk was around 6.75%, according to a market source. The deal priced after the close, coming upsized at $350 million and on top of price talk.

In the secondary space, Citigroup Inc.'s preferreds were dominating trading as it was reported that the company's third-quarter earnings - which are slated to be released on Oct. 15 - could include a decline in bond-trading revenue.

Also on the busy side were Fannie Mae and Freddie Mac securities. A market source said The Wall Street Journal published a "lengthy" piece about the agencies and the broader mortgage agency. The source said the article contained "nothing new" but that it might have spurred some gains for the preferreds.

Allstate prices

Northbrook, Ill.-based insurance company Allstate sold $350 million of 6.75% series C fixed-rate noncumulative perpetual preferreds on Monday.

The deal was upsized from $200 million and in line with talk.

A trader said the new deal "appears to be doing well," seeing a $24.80 bid for paper at midday in the gray market.

"I figured the [5.1% fixed-to-floating rate subordinated debentures due 2053] would be hammered, but they are still holding up pretty well," the trader said.

The issue (NYSE: ALLPB) was trading off 36 cents, or 1.54%, at midday at $23.05. The issue finished the session down just 23 cents at $23.18.

As for the 5.625% series A fixed-rate noncumulative perpetual preferreds (NYSE: ALLPA), they closed the day down 64.37 cents, or 2.7%, at $23.19.

Another market source said the new issue was offered at $24.84 late in the day but ahead of pricing.

The company intends to use proceeds to prefund two 2014 maturities.

Among recent deals, CHS Inc.'s $250 million issue of series 1 class B cumulative redeemable preferreds - a deal that came Thursday and freed to trade on Friday - was pegged at $25.33 bid as of midday.

Citigroup active

Citigroup's 7.875% fixed-to-floating rate trust preferreds (NYSE: CPN) were the top trading security of the day, with over 1.25 million shares changing hands.

The preferreds firmed up by 20 cents to $27.60.

Meanwhile, the newer $900 million of 7.125% fixed-to-floating rate series J noncumulative perpetual preferreds were in a range of $25.15 to $25.30.

That issue priced Sept. 12 and is expected to list on the New York Stock Exchange any day now. The expected ticker symbol is "CPJ."

Though the recently priced deal has been dominating since it first came, the activity in both issues might have been affected by several new headlines regarding the New York-based bank.

Earlier in the day, it was reported that the company is expected to post a fairly hefty decline in revenue from its bond-trading unit when it releases its quarterly report on Oct. 15.

Later in the session, the bank was in the news again as it said it would cut about 1,000 jobs tied to its mortgage unit. Most of the cuts will take place in Las Vegas.

The decision to decrease the mortgage staff has come on the back of a decline in new home loan and refinancing demand.

Fannie, Freddie rise

Fannie and Freddie preferreds were on the rise Monday, which one market source said might have been due to an article in The Wall Street Journal on Monday.

Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) gained 14 cents, or 2.41%, ending at $5.94. Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) put on a dime, or 1.71%, closing at $5.95.

The article explained at length the situation involving the two mortgage giants and the government's plan to privatize - or possibly liquidate and replace - them. The author was quick to note that action will likely not come quickly, given that any plan could have implications on one institution Americans have come to depend on: the fixed-rate 30-year mortgage.

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