Midday Commentary: M&T Bank to price fixed-to-floating rate noncumulatives; Citigroup paper eyed

By Stephanie N. Rotondo

Phoenix, Feb. 6 - The primary preferred stock market saw another new deal hit the tape Thursday as M&T Bank Corp. announced an offering of $1,000-par series E fixed-to-floating rate noncumulative perpetual preferreds.

A trader said price talk on the issue was around 6.5%, though at mid-morning he had yet to see any markets for the paper.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC are the joint bookrunners. Sandler O'Neill + Partners LP is the joint lead manager.

Proceeds will be used for general corporate purposes, which may include the repayment of debt.

The issue will not be listed.

Meanwhile, Citigroup Inc.'s $480 million of 6.875% series L noncumulative perpetual preferreds - a deal that priced Wednesday - had yet to free from the syndicate early Thursday.

A trader saw the issue at $24.60 bid, $24.70 offered.

The trader observed that the deal might not be doing well because it lacked the fixed-to-float feature that has become so popular of late. Along with that, the issue is non-callable for five years, versus the 10-year non-call feature of the 6.875% series K fixed-to-floating rate noncumulative perpetual preferreds.

The Ks (NYSE: CPK) were trading at $25.17 early in the session, though the securities had already hit a high of $25.22 on the day.

At $25.20, the trader noted, the Ks are "15 basis points richer than the new issue, yield-wise."

On top of that, the longer call makes it easier for insurance companies to model their portfolios, making them more likely to pick a security like the Ks over the Ls. Retail investors might be more prone to choose the Ls, he said.

As of mid-morning, the Wells Fargo Hybrid and Preferred Securities index was off 2 bps.

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