Citigroup, Zions Bancorporation bring deals; secondary quiet, weaker as investors eye primary

By Stephanie N. Rotondo

Phoenix, Sept. 12 - Citigroup Inc. added a new issue to the preferred stock market on Thursday, $900 million of fixed-to-floating-rate series J noncumulative perpetual preferreds.

The deal came on the heels of a remarketing of $2.42 billion of Citigroup subordinated debt held by the Federal Deposit Insurance Corp., a two-tranche issue that priced Wednesday.

A trader said price talk for the preferreds was 7.25% but that "it seemed really attractively priced" and, as such, it could be tightened to 7.125%.

He saw a $24.83 bid in the midday gray market for the paper.

The trader proved to be correct, as the company ended up pricing the preferreds at 7.125%.

The deal was upsized from an expected $500 million.

Post-pricing, another trader said there was "a lot of institutional demand" for the deal, though he said that "the syndicate was kind of sloppy." As such, he said he saw trades in the $24.70s to $24.80s.

He quoted the issue at $24.75 bid, $24.80 at the end of business.

"That should keep us busy today and next week," he opined.

Also going on in the primary, the market was readying for the conclusion of Zions Bancorporation's online modified Dutch auction of $25-par fixed-to-floating-rate subordinated notes due September 2028. The auction began early Wednesday and ended at Thursday's close.

The Salt Lake City-based bank said on Monday that it would sell up to $250 million of the notes. However, a trader said the new deal was overshadowed by the Citigroup deal, and only $75 million of the notes were sold through the auction at par. The company also sold $12.89 million of the notes outside of the auction.

Still, the trader said that the new Zions deal and Kayne Anderson MLP Investment Co.'s $50 million of 4.6% series G mandatorily redeemable preferreds, a deal that priced Monday, "looked very good."

As for secondary dealings, a trader said the space was "mildly weaker." He speculated that interest in the Citigroup deal was fueling the modest dip.

The Wells Fargo Hybrid and Preferred Securities index finished the session off 37 basis points.

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