Preferred primary market picks up; Vornado, CapLease announce offerings; NextEra weakens

By Andrea Heisinger

New York, Jan. 16 - Two new offerings of $25-par preferred shares were announced Wednesday - one by Vornado Realty Trust and another by CapLease, Inc.

There was "kind of a slow leak throughout the day," a source said of the market, adding that shares were off 7 basis points overall, or about 1.5 cents per share.

"Liquidity in newer issues is heavy," the source said.

Vornado is pricing a $300 million offering of perpetual series L preferreds, with talk in the 5.5% area, a trader said in late morning of the New York session. The New York-based real estate investment trust is contributing proceeds to its operating partnership for use in general corporate purposes.

A smaller offering of 7.25% series J perpetual cumulative preferreds is planned by CapLease, a real estate investment trust for commercial properties.

A source said that there was no news of size on the CapLease deal, proceeds of which are being used to redeem 8.125% series A preferreds from the company.

The source added that it was "a little unusual" for the company to set the coupon in the sale announcement, but "in these little deals, they sometimes do best efforts. It looks like they need to raise about $75 million, so we'll see what happens."

Neither Vornado nor CapLease had priced as of the market close, leading one trader to say that "there's so much supply that it's hard for deals to get done. I don't know why they wait until after the close."

There was no sign of a sale from PennantPark Investment Corp. that was announced on Tuesday. The company plans to price $25-par preferreds due Feb. 1, 2025.

In trading, Tuesday's pricing from NextEra Energy Capital Holdings Inc. was holding its own at midday but suffered by the market close.

The company sold $425 million of 5% $25-par series J preferred shares due Jan. 15, 2073, which were seen trading at $24.70 to $24.75, a trader said at midday.

They "were closing way down," another trader said in late afternoon, quoting the shares as down 38 cents to $24.65.

A new 7.625% fixed-to-floating-rate subordinated note from NuStar Logistics LP was freed to trade and was quoted at $25.30 to $25.35. A trader said it was one of the most active issues of the day with 1.64 million shares changing hands, ending up on the day at $25.34. NuStar priced $350 million of the hybrids on Jan. 14.

Other bonds active in trading included KKR Financial Holdings LLC's 7.375% perpetual preferreds which had 959,000 shares trade, ending up 1 cent on the day at par. The preferreds were sold at par of $25.00.

Vornado launches perpetual

Vornado Realty Trust launched a $300 million offering of $25-par series L perpetual cumulative redeemable preferred stock on Wednesday, with pricing expected early Thursday, a source close to the trade said.

Talk at midday was in the 5.5% area, a trader said. The shares were launched at 5.4%, the source said.

Dividends will be payable quarterly on Jan. 1, April 1, July 1 and Oct. 1 beginning on April 1, 2013.

There is a call option on or after January of 2018 at par plus accrued or unpaid dividends.

Bookrunners are Bank of America Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC.

Proceeds will be contributed to the company's operating partnership in exchange for preferred units. The operating partnership will use proceeds for general corporate purposes, including payment of the redemption or repurchase price for preferred stock and units.

Vornado, a real estate investment trust based in New York City, will apply to list the preferreds on the New York Stock Exchange.

CapLease plans offering

CapLease is preparing a sale of 7.25% $25-par series C cumulative redeemable preferred shares, according to a 424B5 filing with the Securities and Exchange Commission on Wednesday.

Interest on the shares will be payable quarterly on or about the 15th day of January, April, July and October, beginning April 15, 2013.

The shares are callable at par plus accumulated and unpaid dividends on or after January of 2018.

There is an optional call at par plus accrued and unpaid dividends if a change-of-control event occurs.

MLV & Co. is the bookrunner for the sale. Lead manager is JMP Securities.

Proceeds will be used for general corporate purposes, primarily for the repurchase or redemption of series A preferred stock.

CapLease, a New York City-based REIT of commercial real estate properties, will apply to list the shares on the New York Stock Exchange under the symbol "LSEPrC."

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