Market readies for short week; Pitney, Kennedy-Wilson deals on tap; recent issues struggle

By Stephanie N. Rotondo

Phoenix, Nov. 19 - Preferred stocks were somewhat muted in terms of volume on Monday as the market prepares for a shortened holiday week due to Thanksgiving.

However, despite the lack of volume, things were trending toward the firm side.

In the primary arena, there was not much action to speak of in new offerings announced by Pitney Bowes Inc. and Kennedy-Wilson Holdings Inc.

Pitney Bowes said it would bring at least $75 million of $25-par senior notes due November 2022, with pricing around 5.25% to 5.375%.

Kennedy-Wilson meantime said it would offer at least $75 million of $25-par senior notes due Dec. 1, 2042. Price talk is around 7.25%.

A market source remarked that the Pitney issue might be "hard to sell" given what its business is, and another noted that Kennedy-Wilson was a name that "nobody ever heard of."

Neither issue had priced as of press time.

Recent new deals have not been performing as well as their predecessors, and one trader opined that it was due to an overall "pull back" in the market that was spurred by "uncertainty with taxes and capital gains."

"People may want to put money into [straight] stocks versus income-producing securities," the trader said, noting that there were several articles out over the weekend that indicated common equities were on the cheap side.

Concerns about the so-called "fiscal cliff" were also playing a role, the trader said.

No love for Pitney

A market source said Pitney Bowes' planned new issue of $25-par senior notes due 2022 was trading at $24.75 in the gray market.

"It's a hard name to sell," he said, noting that the company's business - mainly selling mailing equipment to other businesses - might not be all that necessary in the day and age of e-mail and texting.

"Nobody really likes what they do," said another trader. "There's some pushback on the sector."

Recent deals suffer

Recently priced issues have not been performing as well as others have in the last few months, with many pointing to concerns about taxes and dividend treatments going forward.

"Nothing is trading very well," a trader said. "A lot of the new stuff has been underwater."

Tightening yields have also been troublesome, as some common shares trade at yields comparable to preferreds, another trader remarked.

Among recent deals, First Republic Bank's new $150 million issue of 5.625% series C noncumulative perpetual preferreds were seen trading at $24.55 at midday.

The issue came late Thursday.

NextEra Energy Capital Holdings Inc.'s $500 million of 5.125% $25-par series I junior subordinated debentures due Nov. 15, 2072 were meantime pegged at $24.60 offered at midafternoon.

After the bell, a source said trading in that issue was "very volatile."

"That often happens when an issue frees to trade," he said.

The notes priced Wednesday and freed Friday.

The source said paper had traded down 40 cents and then moved up to around par, only to go out in a $24.48 to $24.58 context.

And, Wells Fargo & Co.'s $600 million of 5.125% series O noncumulative perpetual class A preferreds were at $24.92 bid around lunchtime. A source called the preferreds up 2 cents at the close at $24.95.

That issue priced Tuesday.

City National to list

City National Corp.'s $175 million issue of 5.5% series C noncumulative perpetual preferreds -a deal that priced Nov. 5 - is expected to hit the New York Stock Exchange on Tuesday.

The ticker symbol is "CYNPC."

A trader quoted the preferred shares at $24.51 bid, $24.57 offered.

City National is the Los Angeles-based holding company for City National Bank.

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