Pennsylvania REIT’s new deal comes upsized; Citigroup, Schwab trade actively on earnings

By Stephanie N. Rotondo

Seattle, Jan. 18 – The preferred stock primary market had a new deal on Wednesday, a $150 million issue of 7.2% series C cumulative redeemable preferreds from Pennsylvania Real Estate Investment Trust.

Price talk on the non-rated deal was in the 7.375% area, according to a market source. The deal came upsized from $75 million.

A trader said he saw the issue at $24.80 bid in the early gray market.

Wells Fargo Securities LLC, Citigroup Global Markets Inc., Jefferies, J.P. Morgan Securities LLC and Stifel Nicolaus & Co. Inc. ran the books.

Part of the proceeds from the deal could be used to redeem some or all of the 8.25% series A cumulative redeemable preferreds (NYSE: PEIPrA). In response to that, the series As were up 13 cents at $25.43.

Also in the new issue realm – of sorts – Hercules Capital Inc. said it was selling $150 million of five-year convertible senior notes, with yield talked at 4.25% to 4.5% and an initial conversion premium of 12.5% to 17.5% (expected ratings: BBB-/BBB+).

While a convertible bond deal, the Palo Alto, Calif.-based specialty finance company said it would use proceeds to repurchase or redeem its 7% notes due 2019, a $25-par “baby bond.”

Hercules actually has two such issues, one due April 30 (NYSE: HTGZ) and one due Sept. 30 (NYSE: HTGY).

The April maturity – $81.75 million outstanding – ended Wednesday’s session a penny higher at $25.59, while the September paper – a $160 million issue – rose 7 cents to $25.54.

Citigroup, Schwab eyed

In the secondary, Citigroup Inc.’s 7.875% fixed-to-floating rate trust preferreds (NYSE: CPrN) were on the active side after the bank reported its quarterly results.

The profit of $1.14 per share beat expectations, though revenue of $17.01 billion missed forecasts.

The preferreds were steady at $26.00.

Analysts had predicted EPS of $1.12 on revenue of $17.3 billion.

Revenue from fixed-income trading rose 36%, while equity trading revenue improved 15%.

For the full year, net income was $14.9 billion on revenue of $69.9 billion. The bottom line was up 13% year over year, but revenue declined 8.5%.

Meanwhile, Charles Schwab Corp.’s 5.95% series D noncumulative perpetual preferreds (NYSE: SCHWPrD) were also busy on earnings, closing off 2 cents at $25.51. The paper was up 3 cents to $25.56 in early dealings.

Like Citigroup, profit was in line with expectations, but revenue was not.

Charles Schwab reported EPS of 36 cents on revenue of $1.97 billion. For its part, revenue was up 17% year over year.

Net interest revenue increased 31% to $907 million. Asset management and administration fees rose 19% to $801 million.

Trading revenue, however, was down 3% at $302 million.

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