New issues churning out; Vornado plans deal; Ashford brings $75 million; Entergy notes decline

By Stephanie N. Rotondo

Portland, Ore., April 13 - New preferred stock issuance continued to ramp up Wednesday as Vornado Realty Trust announced plans for an issue of series J cumulative redeemable preferreds.

The deal follows new issues launched by Entergy Mississippi Inc. - which priced Tuesday - and one by Ashford Hospitality Trust Inc. The latter issue was announced Monday and priced Wednesday.

Overall, a trader said the preferred market was "more green than red," pushed up in part by a new report published by CreditSights Inc.

"It's been a big talking point," the trader said of the report that dealt with new banking regulations and how that would affect trust preferreds and straight preferreds. The trader noted that his firm had been making many of the same points for the last six months but conceded that the "independent" review might lend more credibility.

Vornado to offer preferreds

Vornado Realty Trust, a New York-based real estate investment trust, said it was planning to sell series J cumulative preferreds at $25 per share.

According to one market source, the deal was expected to bring about 4 million preferreds, or $100 million. However, he said he heard the deal was upsized to 7 million preferreds, or $175 million.

Pricing is expected on Thursday. Price talk is 6.875% to 7%.

Another market source said the preferreds were being quoted in the gray market at less 25 cents bid, less 10 cents offered.

Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. Inc., UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunners. Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and RBC Capital Markets LLC are the co-managers.

Proceeds from the sale will be contributed to Vornado's operating partnership in exchange for preferred units. The operating partnership will use the funds for general business purposes, including the redemption or repurchase of preferred stock and units.

Ashford brings $75 million

Ashford Hospitality Trust priced a $75 million issue of 9% series E cumulative preferred stock.

The company originally announced the deal on Monday. At that time, the market had been expecting 2 million shares, or $50 million. However, the company said it would sell 3 million of the preferreds at $25 per share in a regulatory filing on Wednesday.

There is also an over-allotment option for 450,000 shares.

As previously reported, price talk was 8.875%.

A trader said the new preferreds were bid at less 52 cents in the gray market.

Settlement is expected Monday.

Proceeds will be used to redeem or repurchase all or a portion of the company's series B-1 cumulative convertible redeemable preferreds, all of which are held by Security Capital Preferred Growth Inc., and to repay a portion of the outstanding borrowings under its senior credit facility or for other general corporate purposes.

Citigroup, Merrill Lynch and UBS Securities are the joint bookrunners. Deutsche Bank Securities and Stifel, Nicolaus & Co. Inc. are the senior co-managers. Robert W. Baird & Co. Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (SA) Inc., FBR Capital Markets and KeyBanc Capital Markets LLC are the co-managers.

Ashford is a Dallas-based REIT.

Entergy notes falling

Entergy Mississippi's new $150 million issue of 6% first mortgage bonds - which priced Tuesday at par of $25 - were seen slipping in the gray market, according to market sources.

One source placed the new issue at $24.55 bid, $24.70 offered, down from trading levels around $24.74 previously.

Another trader said the paper was offered at $24.60.

Entergy is based in Jackson, Miss.

Two issues one-sided

Among other recent new issues, Sunstone Hotel Investors Inc.'s $115 million issue of 8% series D cumulative redeemable preferreds was offered at $24.85, according to a trader.

That deal priced April 1.

Meanwhile, Public Storage's $325 million issue of 6.5% series Q perpetual cumulative preferreds - a deal that priced April 5 - was seen at $24.55 bid.

CreditSights: TRUPs attractive

With the Dodd-Frank financial regulations set to take effect on Jan. 1, 2013, many in the market have pondered what it will mean for the preferred market.

In a new research report, CreditSights said it views preferred and trust preferred investments as attractive, especially as many trust preferreds (or TRUPs) will be redeemed in the next two to five years.

Among TRUPs, CreditSights said the best bang for the buck would be in issues with dividends in the 6.5% to 7% range.

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