Trading in preferreds muted ahead of JPMorgan earnings; Vornado's deal frees; Chesapeake firms

By Stephanie N. Rotondo

Phoenix, July 12 - The preferred stock arena was on the subdued side, a trader said Thursday.

"There's very, very small movement," he said, with little to no news out to act as a catalyst.

He speculated that investors were waiting until JPMorgan Chase & Co.'s earnings announcement on Friday.

"If they have strong earnings or stronger-than-expected earnings, we could see some of these bank issues jump up," he said. He further opined that banks could start churning out new issues toward the end of July or in early August.

Another trader said he heard JPMorgan would soon be coming with a new preferred issue.

In the primary realm, Vornado Realty Trust's new $300 million issue of 5.7% series K cumulative redeemable perpetual preferreds freed from the syndicate, according to a trader.

In secondary dealings, Citigroup Inc. announced yet another redemption toward the end of the day.

The New York-based bank had previously announced a redemption of two sets of trust preferreds in early June following the release of the Federal Reserve's new proposed rules on regulatory capital. The new call, however, was not an extraordinary one.

Vornado frees to trade

Vornado Realty's newly priced 5.7% series K cumulative redeemable perpetual preferreds freed to trade, according to a trader.

Paper was trading around $25.10 at midday.

After the close, a trader quoted the issue at $25.05 bid, $25.10 offered.

The New York-based real estate investment trust priced the deal Wednesday. The issue was initially expected to be about $100 million, and price talk was originally around 5.875%.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities LLC, Wells Fargo Securities LLC and Morgan Stanley & Co. LLC were the joint bookrunning managers. The co-managers were Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Barclays Capital Inc. and Credit Suisse Securities (USA) LLC.

Proceeds from the sale will be contributed to the trust's operating partnership in exchange for preferred units. The operating partnership will then use the funds for general business purposes, which may include the redemption or repurchase of other preferred stock and units.

As previously reported, a trader told Prospect News that it was believed Vornado would start calling several issues.

Chesapeake gains

Among other new deals, Chesapeake Lodging Trust's 7.75% series A cumulative redeemable preferreds were hanging in around $25.10 at midday, a trader said.

After the close, another trader pegged the preferreds at $25.15.

The Annapolis, Md.-based REIT priced the deal Tuesday and on Wednesday said its greenshoe had been exercised in full, bringing the total issuance to $125 million from $110 million.

A trader said the new securities had not yet been assigned a trading symbol but speculated that one could be picked on Friday.

Wells Fargo, JPMorgan and RBC Capital Markets LLC were the deal's joint bookrunners. The co-managers were Robert W. Baird & Co. Inc. and Deutsche Bank.

Proceeds will be contributed to the REIT's operating partnership in exchange for series A preferred stock units. The operating partnership will then use the funds to repay outstanding amounts under a revolving credit facility and for other general corporate purposes.

Citi calls trust preferreds

Citigroup said late in the day Thursday that it will redeem its 7.25% enhanced trust preferreds (NYSE: CPF) on Aug. 15.

The redemption is being done in the ordinary course of business, as Aug. 15 is the first day the securities become redeemable.

The trust preferreds closed up 3 cents - albeit in thin trading - at $25.34, which compares with the $25.3021 call price.

Once the redemption has occurred, Citigroup's tier 1 capital will decrease by 6 basis points. Its tier 1 common capital and tier 1 common capital ratio will not be affected.

The call is the second one Citigroup has undertaken since the Fed released its new proposed rules on regulatory capital. On June 8, the bank called its 8.5% fixed-to-floating trust preferreds and its 8.3% $1,000-par fixed-to-floating enhanced trust preferreds.

Another redemption announcement came after the bell from PNC Financial Services Group Inc.

The company is redeeming the trust preferred securities issued by PNC Capital Trust E and National City Capital Trust IV on July 30 at par.

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