Goldman brings new deal, which fades upon pricing; Citigroup preferreds gain on settlement

By Stephanie N. Rotondo

Portland, Ore., Oct. 19 - The big news Thursday in the preferred stock market was a new issue from Goldman Sachs Group, Inc.

The company announced the "baby bond" deal earlier in the day and priced not long after the market closed. The deal was upsized to $500 million from $250 million and was priced at 6.5%, at the lower end of price talk.

However, the deal was not performing very well in the grey market, and one trader went so far as to say that the issue "wasn't priced right."

Other Goldman Sachs issues were trading weaker on the day.

Citigroup Inc., on the other hand, was trading higher on news the company will settle civil fraud charges related to its mortgage investments in 2007.

"Anytime you see companies move towards cleaning up those issues, you'll see preferreds go up," a trader said.

Overall, a market source said the preferred market was "pretty flat."

"It initially popped up and then eased back," he said. The easing came around the time the Federal Reserve put out its Beige Book survey, which indicated economic growth was present but weak. Later in the day, he added, news of an emergency meeting between the leaders of France and Germany only served to pressure the market more.

Goldman brings new issue

Goldman Sachs priced a $500 million issue of 6.5% $25-par senior notes due 2061 on Thursday.

"It was priced too aggressively. It took a lot of institutional guys out of it," a trader said.

As such, the bonds were not trading well in the grey market.

One trader said the deal was "fading," seeing it around $24.60.

Another trader quoted it at $24.55 bid, $24.65 offered.

Among Goldman Sachs' other issues, the 6.125% $25-par notes due 2060 (NYSE: GSF) fell 43 cents, or 1.73%, to $24.43.

Despite the fact that the new deal was not performing well, a trader opined that "we might start seeing more issues like this" as banks try to replace their trust preferreds.

On Tuesday, the investment banking and financial services firm posted a third-quarter loss of $393 million, or 84 cents per share. That compared to a profit of $1.9 billion, or $2.98 per share, the year before.

Citigroup up on settlement

Citigroup's preferred stocks headed into higher territory on news the company is settling civil fraud charges related to its 2007 mortgage investments.

Citigroup bet against the investments and then made $160 million. Investors meantime lost millions.

Citigroup will pay $285 million to settle the charges, though the bank did not admit any wrongdoing.

"We are pleased to put this matter behind us and are focused on contributing to the economic recovery, serving our clients and growing responsibly," the bank said in a statement.

The 6% trust preferreds (NYSE: CPS) rose 36 cents, or 1.63%, to $22.44. The 8.5% fixed-to-floating-rate trust preferreds (NYSE: CPJ) inched up 2 cents to $25.17, and the 6.95% trust preferred capital securities (NYSE: CPZ) gained 18 cents to close at $23.44.

Broad market mixed

Elsewhere in the land of preferreds, PartnerRe Ltd.'s 6.75% series C cumulative redeemable preferreds (NYSE: PREPC) moved up 14 cents to $24.83 in active trading.

Ally Financial Inc.'s 8.5% series A preferreds (NYSE: ALLYP) were also better, rising 14 cents to $19.50.

Barclays Bank plc's 8.125% noncumulative callable dollar preference shares (NYSE: BCSPD), however, lost 28 cents, or 1.16%, ending at $23.87.

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