NorthStar Realty selling additional series B preferreds; recent new issues gaining traction

By Stephanie N. Rotondo

Phoenix, July 9 - A trader said that preferred stocks were "jumping up following the long bond" on Monday.

Stronger-than-expected results from treasury auctions in France and Germany were also helping, he said.

But another market source said that the market wasn't "up all that much," adding that "liquidity was OK in a handful of names."

There certainly wasn't much happening in the primary arena, aside from a reopening announced by NorthStar Realty Finance Corp. The company said early in the session that it will sell more of its 8.25% series B cumulative redeemable perpetual preferreds. One source was baffled by the news.

Meanwhile, Royal Bank of Scotland Group plc preferreds again dominated the secondary arena. The preferreds were mostly up on the day, though without specific news to cause the gains. A source noted that a "large buyer" could be sniffing for the "undervalued" paper.

NorthStar plans reopening

NorthStar Realty Finance will price an add-on to its 8.25% series B cumulative redeemable perpetual preferred stock, the company said in a regulatory filing on Monday.

The company priced $40 million of the preferreds in a reopening on March 14 and registered on June 12 to sell up to $62.5 million of the preferreds in an at-the-market offering.

The securities are listed on the New York Stock Exchange under the ticker symbol "NRFPB." The issue closed down 74 cents, or 3.13%, at $22.90.

The final price, a market source noted, was also around the area the deal is expected to price at, which would give the paper around a 9% yield.

"The price just tanked," he said, following news of the reopening. "I don't know why they would want to do that."

UBS Securities LLC and Citigroup Global Markets Inc. are the joint bookrunning managers. The co-lead managers are Deutsche Bank Securities Inc. and Stifel, Nicolaus & Co. Inc. The co-managers are JMP Securities LLC, MLV & Co. LLC and Sterne, Agee & Leach Inc.

Proceeds will be used to make investments, to repurchase or pay liabilities and for general corporate purposes.

NorthStar is a New York-based real estate investment trust.

Recent issues climb

Recent deals moved higher during the first trading session of the week.

"All of the new issues are trading up to new heights," a trader said.

Public Storage's 5.625% series U cumulative preferreds (NYSE: PSAPU), for instance, rose 15 cents to $26.18. The trader noted that the issue was "still the cheapest" of the Public Storage complex, at least in terms of yield.

Entergy Louisiana LLC's 5.25% $25-par first-mortgage bonds due 2052 (NYSE: ELJ) meantime inched up 18 cents to $25.64, while Southern California Edison Co.'s 5.625% trust preference securities (NYSE: SCEPF) issued through SCE Trust I were up 13 cents at $25.85.

And Qwest Corp.'s 7% $25-par notes due 2052 (NYSE: CTU) earned 16 cents, closing at $25.86.

The trader remarked that he was "surprised" that no new issues were announced Monday, "especially with the way everything has jumped up here. I'm assuming we'll see some other new issues coming in here."

RBS deemed 'undervalued'

Royal Bank of Scotland's preferred issues were among the day's most active and finished the session mostly higher.

The 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) moved up 4 cents to $19.80, while the 6.35% series N noncumulative dollar preference shares (NYSE: RBSPN) gained 6 cents, closing at $17.53.

The 6.08% noncumulative guaranteed trust preferreds (NYSE: RBSPG), however, dipped 7 cents to $14.40.

When asked what had caused the activity in the name, a market source remarked that the issues were "undervalued.

"There's also speculation about a certain large buyer," he said.

Additionally, RBS preferreds will be included in Standard & Poor's preferred stock index as of July 30.

RBS is based in Edinburgh.

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