M&T Bank prices $350 million fixed-to-floating preferreds; Seaspan eyed; Citi frees up

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.

"You don't usually see gray markets in the $1,000-par markets," another source noted.

After the close, the deal priced. The company sold $350 million of the preferreds at par to yield 6.45%.

On Feb. 15, 2024, the issue begins to float at Libor plus 361 basis points.

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.

Seaspan Corp. also announced a new deal. The company was planning to issue at least $50 million of series E cumulative redeemable preferreds, with price talk set at 8.25% to 8.375%.

That deal did eventually price - $125 million preferreds at par to yield 8.25%, though it came as a surprise to one source, who said he didn't expect that it would come Thursday, as it was "more of a story situation.

"It's their third preferred deal in two years, so it's sort of known, but not really known," he said. Additionally, the deal is non-rated, "so you got to do your work on it."

Meanwhile, Citigroup Inc.'s $480 million of 6.875% series L noncumulative perpetual preferreds - a deal that priced Wednesday - freed from the syndicate in early afternoon trading on Thursday.

A trader saw the issue at $24.60 bid, $24.70 offered early in the day. After it freed, a source said he saw it at $24.60 bid, $24.66 offered.

The first 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. They closed flat at $25.18.

At $25.20, the trader noted, the Ks are "15 bps 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. By the end of the day, it was down 4 bps.

"The market was pretty stable the whole day," a source commented. "Volume was on the lighter side, but that was probably because people were new-issue focused."

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