Midday Commentary: Citigroup preferreds little changed on surprise CEO exit; Urstadt on tap

By Stephanie N. Rotondo

Phoenix, Oct. 16 - Whether it was anticipation for the evening's presidential debate or news that Citigroup Inc.'s Vikram Pandit had resigned as chief executive, trading in the preferred stock realm continued to be subdued Tuesday.

In a surprising move, Citigroup announced that Pandit was leaving Tuesday morning, just one day after the company reported better-than-expected earnings. The rumor mill soon began churning out conspiracy theories, such as that Pandit was ousted in order for him to become a fall guy for various legal scuffles the bank could be or already is facing.

But one trader opined that there was no conspiracy theory, that it was simply a matter of Pandit wanting more money. The trader noted that Pandit's compensation for the last several years has been $1 per year. While the former CEO likely also has stock in the company, the trader pointed out that the equity has lost 80% since the economic crash.

"I can't imagine it being a bad thing for the company if they want to change management," he said.

Michael Corbat is replacing Pandit. Corbat had previously been CEO of Citi's European, Middle East and African operations.

Surprising as the news was, there was not too much reaction in Citi's preferreds, though the paper was generally higher as of midday.

"It's a non-event for the preferreds," the trader said.

The $100-par 7.5% tangible dividend enhanced common stock (NYSE: CPH) was up 59 cents to $102.21 at midafternoon.

Meanwhile, Urstadt Biddle Properties Inc. announced a sale of series F cumulative redeemable perpetual preferred stock.

The company said it was issuing 3 million shares, with a 450,000-share over-allotment option.

A trader said he had not seen any price talk on the new issue. In early trading, there was a $24.65 bid in the gray market for paper, which moved up to $24.85 bid at midday. Still, he said he had not seen much actual trading.

BMO Capital Markets is the bookrunner. Stifel Nicolaus & Co. Inc. and Deutsche Bank Securities Inc. are the joint lead managers. Co-managers are Wunderlich Securities Inc., J.J.B. Hilliard, W.L. Lyons, LLC and BNY Mellon Capital Markets, LLC.

Proceeds will be used for general corporate purposes, which may include the redemption or repurchase of other outstanding preferred issues, the repayment of debt, the funding of capital improvements and property acquisitions.

Urstadt Biddle is a Greenwich, Conn.-based real estate investment trust.

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