Kimco prices preferreds, makes gains in trading; Citi issues up on earnings; Vornado active

By Andrea Heisinger

New York, July 16 - The real estate investment trust sector was again active in the preferred stock market on Monday as a new deal was announced by Kimco Realty Corp.

Kimco priced a $225 million deal, a market source said in early afternoon. The size was increased from the minimum $150 million given in a 424B5 filing with the Securities and Exchange Commission.

A trader called it "not a bad deal" as price talk hovered at 5.5% in late morning. The preferreds were quoted trading in the gray market at $24.97. After pricing, they were seen cheaper at $24.92 to $24.97, the trader said, with 5,000 shares offered.

Otherwise, there was "not much else" happening on the primary side of the market, the market source said.

Recent issues of preferreds from Chesapeake Lodging Trust and Chesapeake Lodging LP and Vornado Realty Trust were each seen trading above $25.00.

Most outstanding preferreds from Citigroup Inc. were up on the bank's second-quarter earnings announcement earlier in the day, a trader said after the close.

There was a drop in volume from last week, the trader said.

"It was a typical Monday-in-summer kind of deal," he said, adding that the secondary ended up 5 cents to 6 cents on average.

The most actively traded preferreds of the day were a mix of financial and utility names, the trader said. Royal Bank of Scotland Group plc's issues were particularly active.

Kimco announces deal

Kimco Realty sold an upsized $225 million of class J cumulative redeemable preferred stock at par of $25.00, according to an FWP filing with the Securities and Exchange Commission.

There is no over-allotment option.

A trader said price talk was 5.625% to 5.75%. It was then revised to 5.5% to 5.625% and priced at the tight end of that range.

The preferreds have a liquidation preference of $25,000 each. The securities will be issued as $25 depositary shares each representing a 1/1,000th interest in a preferred.

Dividends will be payable quarterly on the 15th day of January, April, July and October.

The preferreds can be redeemed on or after July 25, 2017 at par plus accrued dividends. There is no stated maturity.

Ownership will be restricted to 9.8% of the outstanding preferreds.

Kimco will apply to list the new series of preferreds on the New York Stock Exchange.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC were the bookrunners.

The joint lead managers were J.P. Morgan Securities LLC and RBC Capital Markets LLC.

The co-managers were Raymond James & Associates, Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., BNY Mellon Capital Markets, LLC, Piper Jaffray & Co. and Scotia Capital (USA) Inc.

Proceeds will be used to redeem the company's class F preferreds on or about Aug. 15 and for general corporate purposes.

Kimco is a New Hyde Park, N.Y.-based REIT.

Chesapeake, Vornado active

A trader said that the 7.75% series A cumulative redeemable preferreds from Chesapeake were actively trading between $25.20 and $25.25.

The $125 million deal from the lodging REIT was priced at par of $25.00 on July 10. The original issue size was $110 million, and a greenshoe was later exercised.

Vornado's 5.7% series K cumulative redeemable perpetual preferreds were quoted at $25.10 to $25.15 in late-morning trading, the trader said.

A second trader said after the close that "Vornado did very well" and quoted the series Ks as ending the day at $25.12.

Vornado, a New York-based REIT, priced $300 million of the preferreds on July 11 at par of $25.00.

Citi issues up on earnings

A trader quoted at least two of Citigroup's outstanding preferred issues as ending the day on a positive note after the bank reported earnings. Citigroup had a drop in revenue in the second quarter, but the number still beat some analyst expectations.

The bank reported earnings of $18.6 billion for the quarter, which was down from the same period the previous year.

Citi's series H preferreds were the most active of the bank's outstanding issues with 446,000 shares trading. They ended up 81 cents at $85.08, the trader said.

He also quoted the bank's series N preferreds ending the day up 15 cents at $28.23 with 266,000 shares trading.

RBS seen active

Two outstanding preferreds from RBS were popular with investors on Monday, along with other deals from the financial and utility sectors.

The RBS series T shares were the most active at the close. Investors traded 941,000 of the preferreds, and they ending the day up 31 cents at $21.49, a trader said.

RBS' series M preferreds had 484,000 shares trade, making them the third most active issue of the day. They ended up 6 cents at $18.96.

BB&T Corp.'s series B preferreds closed the day flat at $25.51 with 789,000 shares trading, making them the second most active deal of the day, the trader said.

Series H $25-par securities from NextEra Energy Capital Holdings Inc. were also among the day's most active deals. There were 280,000 shares traded, and they ended the day up 10 cents at $26.70.

Also among the most actives were the series F trust preference securities from Southern California Edison Co.'s SCE Trust I that were priced in May. The 5.625% preferreds had 447,000 shares trade, closing the day up 17 cents at $26.37.

Stephanie N. Rotondo contributed to this review

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