Midday Commentary: Citigroup, Entergy Arkansas plan preferreds; Comcast, Prudential active

By Andrea Heisinger and Stephanie N. Rotondo

New York, Dec. 6 - Two new offerings - preferred stock and a $25 par bond issue - were announced Thursday morning, but otherwise the market was quiet, sources said.

Citigroup Inc. announced plans for a fixed-to-floating rate note sale while Entergy Arkansas Inc. is pricing $100 million of $25-par first mortgage bonds due Dec. 1, 2052.

"The market's flattish, maybe up a penny after being down a penny," a trader said. He also added that volume was on the light side, other than trading in issues such as the recent Comcast Corp. $25-par issue.

Price talk on the Entergy Arkansas offering is 5% to 5.125%.

A trader quoted the bonds in the gray market at $24.85 and said it's "basically all sold."

"It's a $100 million deal, so it's tiny. It will be put away today," he added.

Interest will be payable on the first day of March, June, September and December, beginning March 1

The notes become callable on or after Dec. 1, 2017 at par plus accrued interest.

Bookrunners are Wells Fargo Securities LLC, Bank of America Merrill Lynch, Morgan Stanley & Co. LLC and Stephens Inc.

Proceeds will be used by the Little Rock, Ark.-based power producer to repay borrowings from the Entergy system money pool and to repay borrowings under a $20 million credit facility with First National Bank that matures April 30 and a $150 million credit facility with Citibank NA.

New York City-based Citigroup will issue series B fixed-to-floating rate noncumulative preferred stock, according to a prospectus filed with the Securities and Exchange Commission.

There was no price talk, and no size, only preliminary information on the sale as of midday, a source said.

"I would imagine they'll launch later this afternoon and price tomorrow," he said.

The preferreds will be issued as depositary shares representing a 1/25th interest.

When declared by the board of directors, dividends will be paid at a fixed rate on a semiannual basis through February 2023. After that, the dividends will be paid at Libor plus a spread on a quarterly basis.

The preferred stock can be redeemed on or after February 2023 at par plus accrued dividends. Additionally, the shares become callable in whole within 90 days of a regulatory capital treatment event.

Citigroup does not intend to list the preferreds on any exchange.

Citigroup Global Markets Inc. is the structuring manager and bookrunner. The lead manager is UBS Securities LLC.

Proceeds will be used for general corporate purposes, which may include funding subsidiaries, financing acquisitions or expansions and the refinancing of debt.

Most of the trading activity was around newer issues, a trader said.

The new Comcast 5% $25-pars due Dec. 15, 2061 were seen actively trading at 702,000 shares, up to $25.20, traders said. The company priced $250 million of the preferreds on Nov. 29.

The $500 million of Prudential Financial Inc. 5.75% $25-par junior subordinated notes due Dec. 15, 2052 were among the top traded issues of the day, at 836,000 shares changing hands, a trader said. The notes were sold on Nov. 27.

Exceptions to the new sales dominating trading were Citigroup series H preferreds and an Entergy New Orleans Inc. 5% $25-par first mortgage bond due Dec. 1, 2052 that were active.

"That's just people swapping them out for the new issues," a trader said.

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