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Midday Commentary: New issues from REITs flooding market; Chesapeake Lodging deal frees up
By Stephanie N. Rotondo
Phoenix, July 11 - There was a major focus on new issues in the preferred market on Wednesday, a trader said.
"Everyone's crazy about the new issues," he said. "REITs abound."
Chesapeake Lodging Trust's newly priced $110 million offering of 7.75% series A cumulative redeemable preferred shares freed to trade during the session.
The deal priced Tuesday, coming upsized and below original price talk.
A trader said there was a $25.10 bid for paper.
Wells Fargo Securities LLC, J.P. Morgan Securities LLC and RBC Capital Markets LLC are the joint bookrunners. The co-managers are Robert W. Baird & Co. Inc. and Deutsche Bank Securities Inc.
Proceeds will be contributed to the trust'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.
Meanwhile, Vornado Realty Trust announced plans to issue up to $350 million of new series K cumulative redeemable perpetual preferreds.
The deal was initially expected to be about $100 million. Price talk was originally around 5.875%, the trader added, but it was later revised to 5.7%.
The issue could price as early as Wednesday.
A trader noted that there was "no selling group," seeing the preferreds at $25.05 in the gray market.
Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities LLC, Wells Fargo and Morgan Stanley & Co. LLC are the joint bookrunning managers. The co-managers are Deutsche Bank Securities Inc., JPMorgan, 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.
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