Public Storage new issue grinding higher; other preferreds mixed; Ally gains, Citi mixed

By Stephanie N. Rotondo

Portland, Ore., April 6 - A preferred stock trader said the market was "en fuego," or on fire, during Wednesday trading.

"It would seem the market just wants to go higher," he said. Good news out of Europe and recent successful capital raises were only fueling the fire, he noted.

He also remarked that some of the gains were due to investors moving out of trust preferreds and into straight preferreds.

Real estate investment trust preferreds in particular have fared very well, he said. Though not yet free to trade, Public Storage's recent new deal was seen gaining ground, an example of the interest in the REIT space.

Among the day's actively traded issues, Ally Financial Inc. continued to top the charts, and both of the company's preferreds were trading up.

Citigroup Inc. was also active but mixed on the day.

Preferred market strengthens

A trader said that recent market strength among preferreds was because many investors are moving "out of TRUPs and into preferreds."

"There are better sellers of trust preferreds and capital securities and more buyers of preferreds," he said.

"TRUPs have been a good trade since Dodd-Frank was announced," he added. "But it's time to take the chips off the table."

REIT preferreds in particular have had a good run, with the Wells Fargo REIT preferred index currently trading at an all-time high, he said.

In April 2008, before the economic crisis bottomed, the index was trading around 1,200 or below. The low-point came in November of that year, when the index read 632.27.

Fast forward three years, and the index traded at 1,781.54 on Wednesday - just barely below the high point of 1,782.08 on April 1.

"That's just crazy," the trader said. "It's higher than we were pre-financial meltdown.

"I don't know that we can say that about very much."

Public Storage issue firms

Public Storage's new 6.5% series Q perpetual cumulative preferred shares - a $325 million issue that priced late Tuesday - was trending higher, according to a market source.

He quoted the preferred shares at $24.72 bid, $24.77 offered, up 8 cents in the gray market.

"For one of those retail syndicated deals, that's not bad," he said.

The Glendale, Calif.-based storage company said it issued 13 million of the preferred shares at par of $25.00.

The market was expecting a $150 million issue, or 6 million shares, priced between 6.5% and 6.625%.

The preferreds were sold at par of $25.00. The deal has a $48.75 million, or 1.95 million share, greenshoe.

Proceeds from the sale will be used to redeem the company's 7.25% series I cumulative preferred shares at par of $25.00 plus accrued and unpaid dividends.

Among Public Storage's listed preferreds, the 6.5% series P shares were up 11 cents at $25.34. The series M preferreds, however, fell a dime to $25.14 and the 7% series N shares dipped a penny to $25.33.

Ally, Citi trade actively

Ally Financial preferreds were again dominating trading in the preferred market and closed the day higher, in line with the general tone of the marketplace.

A market source called the 8.5% series B preferreds up about 10 cents at $25.16 bid, $25.17 offered. The 8.125% series A hybrid trust preferreds were meantime up 8 cents at $25.98 bid, $26.00 offered.

Among other financials, Citigroup's preferreds were mixed, but somewhat active. The 8.5% series J preferreds dropped 7 cents to $26.31 bid, $26.32 offered, while the 7.875% series N preferreds jumped 28 cents to $27.77 bid, $27.80 offered.

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