Costamare prices first preferred stock deal of 2014; Citigroup issue seen as attractive

By Stephanie N. Rotondo

Phoenix, Jan. 13 - The new preferred issue pipeline began to open on Monday as Costamare Inc. announced and later priced $100 million of series C cumulative redeemable perpetual preferreds.

The preferreds priced at par of $25.00 to yield 8.5%, on top of price talk. There is a $15 million greenshoe.

Though a trader said he had thought a bank would be the first new deal of the year, he opined that the Costamare issue "will do well."

At mid-morning - before the deal had priced - the trader had seen a $24.92 offer for paper in the gray market.

After the close, however, another market source said investors - even yield-starved investors - were not clamoring for the new deal.

"I can't say we were overwhelmed by investors wanting to put in orders," he said.

Morgan Stanley & Co. LLC, UBS Securities LLC and Credit Suisse Securities (USA) LLC are running the books for the non-rated deal. Barclays, Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC are the co-managers.

With bank earnings starting on Tuesday - Wells Fargo & Co. and JPMorgan Chase & Co. are first on tap - new issues from financial institutions could start showing up on the calendar later in the week.

Wells Fargo at least "would be confortable doing that," a market source opined. But with the market still smarting from litigation settlements related to Bank of America Corp. - which plans to put out earnings on Wednesday -JPMorgan will likely wait, he said.

"I can't imagine in the current environment that they would come that fast," he said.

Overall, the preferred space continued to be strong.

The Wells Fargo Hybrid and Preferred Securities index was up 32 basis points at mid-morning. But once the common equity side of things began to dip - the upcoming earnings onslaught has some investors jittery - the index slid in kind, ending up only 11 bps on the day.

Citi issue in focus

A trader noted that over the weekend, Barron's published an article about "where to find great yields." In a section regarding preferred securities, Citigroup Inc.'s 6.875% series K fixed-to-floating rate noncumulative preferreds (NYSE: CPK) were mentioned as one such deal.

The issue was active in early secondary trading, moving up a nickel to $25.78. However, by the close of business, the shares had fallen a penny to $25.7199.

The New York-based bank is scheduled to release earnings on Thursday, along with BB&T Corp. Capital One Financial Corp. and Goldman Sachs & Co.

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