Citi preferreds active, stronger after Q1 earnings; CapLease plans new deal; MFA notes to list

By Stephanie N. Rotondo

Portland, Ore., April 16 - It was a "mostly green" day for preferred stocks on Monday, according to one market source.

However, the source added that volume was muted with the exception of Citigroup Inc.

Citigroup's preferreds dominated secondary trading after the company released "reasonable" earnings, the source said. The decent numbers also helped the preferreds move upward.

In the primary arena, CapLease Inc. announced plans for an offering of series B cumulative redeemable preferreds.

"I thought we'd see a lot more new deals this week," a trader said. "But [other than CapLease], I haven't heard anything."

In recent new issues, MFA Financial Inc.'s $100 million of 8% $25-par notes due 2042 were trading "all over the place," a source said. Another source said the deal is expected to list on the New York Stock Exchange on Tuesday.

Citigroup gains

Citigroup preferreds had the most action of any issues in the secondary market after the company reported first-quarter earnings.

The 7.5% $100-par tangible dividend enhanced common stock (NYSE: CPH) rose $1.35, or 1.38%, to $99.04, and the 7.875% $25-par fixed-to-floating trust preferreds (NYCE: CPN) gained 3 cents, closing at $27.14.

For the first quarter, the New York-based bank reported net income of $1.11 per share, up 7% from the year before. Revenues improved 1% to $20.2 billion.

The per-share income was better than the $1.00 per share analysts were expecting.

The tier I common capital ratio was 7.2%.

Though the numbers were deemed "reasonable" by one market source, Citi's chief executive, Vikram Pandit, warned that "there is still much macro uncertainty."

CapLease selling preferreds

New York-based real estate investment trust CapLease announced plans to issue series B cumulative redeemable preferreds.

Around midday, a trader said he saw a $24.65 bid for the paper in the gray market.

The deal is expected to be priced between 8.375% and 8.5%, and the size is expected to be $50 million, according to the trader.

CapLease will apply to list the new series of preferreds on the New York Stock Exchange under the ticker symbol "LSEPB."

Wells Fargo Securities LLC and Citigroup Global Markets Inc. are the bookrunners.

Proceeds will be used for acquisitions and other general corporate purposes. The company might also use a portion to reduce outstanding debt obligations.

MFA notes to list

MFA Financial's $100 million of 8% $25-par senior notes due April 15, 2042 are expected to list on the NYSE on Tuesday, a trader said.

The ticker symbol is "MFO." The deal originally priced - with a $15 million over-allotment option - on April 3.

Early on in the session, the trader saw notes trading at $24.65.

After the bell, a market source said the notes were "all over the place." He said that the notes hit a high of $25.20 and that the volume-weighted average price was $24.65. The notes closed up a nickel from Friday's close at $24.67.

Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC were the bookrunners.

The company has the option to redeem the notes on or after April 15, 2017. In the event of a change of control, MFA will be required to offer to repurchase the securities at 101% of par plus accrued interest.

Proceeds will be used to acquire mortgage-backed securities consistent with the firm's investment policy and for working capital, which may include the repayment of repurchase agreements.

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