Midday Commentary: Preferred market anticipating JPMorgan results; new REIT issues doing well

By Stephanie N. Rotondo

Phoenix, July 12 - The preferred stock arena was on the subdued side, a trader said Thursday.

"There's very, very small movement," he said, with little to no news out to act as a catalyst.

He speculated that investors were waiting until JPMorgan Chase & Co.'s earnings announcement on Friday.

"If they have strong earnings, or stronger-than-expected earnings, we could see some of these bank issues jump up," he said. He further opined that banks could start churning out new issues toward the end of July or in early August.

In the primary realm, Vornado Realty Trust's new $300 million issue of 5.7% series K cumulative redeemable perpetual preferreds freed from the syndicate, according to a trader.

The paper was trading around $25.10 versus its $25.00 issue price.

The New York-based real estate investment trust priced the deal Wednesday. The issue was initially expected to be about $100 million and price talk was originally around 5.875%.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities LLC, Wells Fargo Securities LLC and Morgan Stanley & Co. Inc. were the joint bookrunning managers.

Proceeds from the sale will be contributed to the operating partnership in exchange for preferred units. The operating partnership will then use the funds for general business purposes, which may include the redemption or repurchase of other preferred stock and units.

As previously reported, a trader told Prospect News that it was believed Vornado would start calling several issues.

Meanwhile, Chesapeake Lodging Trust's $110 million offering of 7.75% series A cumulative redeemable preferreds was hanging in around $25.10. It priced at $25.00.

The Annapolis, Md.-based REIT priced the deal Tuesday.

A trader said the new securities had not yet been assigned a trading symbol, but speculated that one could picked on Friday.

Wells Fargo Securities LLC, JPMorgan Securities LLC and RBC Capital Markets LLC were the deal's joint bookrunners.

Proceeds will be contributed to the operating partnership in exchange for series A preferred stock units. The operating partnership will then use the funds to repay outstanding amounts under a revolving credit facility and for other general corporate purposes.

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