Fifth Third redemption pressures other callable preferreds, such as Wells Fargo, Citigroup

By Stephanie N. Rotondo

Portland, Ore., May 20 - While one trader noted that it was "very quiet" in the preferred market Friday, another said that it was a "whipsaw day."

"People kind of thought there would be some buy opportunity," the second trader said. "So there was a lot of up and down."

According to the second trader, the market is trying to "determine what the winners are going to be" in light of Fifth Third Bancorp's recent redemption announcement. The Cincinnati-based bank said it would call early about $450 million of trust preferreds.

That news had caused sell-off pressure for the bank, as well as any other TRUPs that had similar language - in other words, any preferreds that allowed for an early call.

Meanwhile, UMH Properties Inc. priced a deal that was originally announced Wednesday. The deal also came upsized.

Seaspan Corp.'s add-on deal also priced Friday. The shares came at a premium, as was expected.

Early callable preferreds off

Preferreds that could potentially be called early - or as one trader said, "infected" preferreds - were mostly lower Friday, as the market attempts to determine "who is not infected."

He said Wells Fargo's capital XIV trust preferreds were down "like 19 cents" on the day - trading in the high $26 range - but also noted that the securities were down from a high of $27.80 earlier in the week.

The paper - like many others, including Citigroup Inc.'s floating-rate series J preferreds and J.P. Morgan Chase & Co.'s series Z paper - has been weakening ever since Fifth Third Bancorp announced an early call on $450 million of its securities.

He said that, for the day, the Citi Js fell 16 cents while JPMorgan dropped 24 cents. The latter caused the trader to speculate that the preferreds were "oversold."

However, KeyCorp's 8% capital X series F preferreds have been trading up on the news. According to the trader, that is "because they are going to pay a dividend in the next month approximately.

"Even in the worst case scenario, they won't be called until the end of summer," he remarked. "So that's not a bad position to be in."

At this point, he added, it's all speculation.

"They may not do anything," he said of the various banks. If so, the preferreds could trade back up.

Wells Fargo's capital XIV trust preferreds (NYSE: WCO) closed down 16 cents at $26.74. JPMorgan's series Zs (NYSE: JPMPZ) dropped 17 cents to $25.87, while Citi's series J preferreds (NYSE: CPJ) fell 8 cents to $26.03.

Key's series F securities earned 2 cents, ending at $25.79.

UMH taps market

Freehold, N.J.-based real estate investment trust UMH Properties sold a $30 million underwritten offering of 8.25% series A cumulative redeemable perpetual preferred stock on Friday.

The deal was originally announced Wednesday and price talk was 8.25% to 8.375%, according to a market source. It was expected that the company would sell 1 million shares.

Proceeds will be used to purchase additional properties in the ordinary course of business and for general corporate purposes, including the repayment of debt.

Seaspan comes at premium

Seaspan also priced its previously announced deal, an add-on to its 9.5% series C cumulative redeemable perpetual preferred shares.

The deal originally came in January.

The Hong Kong-based containership company planned to sell 4 million of the preferred with a par value of $100 million.

However, as was expected, the preferreds were priced with a premium at $27.15, Friday's closing share price (NYSE: SSWPC). Therefore, total proceeds will be more than $105 million.

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