Midday Commentary: Preferred market coming off week's highs; Citigroup announces offering

By Stephanie N. Rotondo

Phoenix, Oct. 24 - The preferred stock market was "a little softer," a trader said Thursday.

However, he said the dip was "nothing material," pointing out that the market had been up early on in the session.

As of midday, the Wells Fargo Hybrid and Preferred Securities index was down 19 basis points.

Citigroup Inc. announced an offering of at least $500 million of series K fixed-to-floating rate noncumulative perpetual preferreds.

Initial price talk was around 7%, but a trader said that was revised to 6.875%.

He saw gray market quotes for the paper in the less a dime to less 15 cents range.

Meanwhile, First Republic Bank's $200 million of 7% series E noncumulative perpetual preferreds "got shoved to the side" in the wake of the new Citi issue, the trader said. He said the preferreds - which priced Monday and freed to trade on Tuesday - were still trading around par.

"It's a bigger issue," the trader said of the Citi deal, explaining why investors were zeroing in on it instead of on First Republic.

Also, AdCare Health Systems Inc. said that it had priced a $12.5 million "best efforts" add-on to its 10.875% series A cumulative redeemable preferreds on Thursday. The preferreds were sold at par, which was a discount from Wednesday's $27.75 closing price.

The preferreds (NYSE: ADKPA) traded off $2.79, or 10.05%, as of midday on Thursday to $24.96. The paper had opened the day around par.

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