Chase Manhattan Corp. is set to issue $150 million of preferred stock today and may use the proceeds to redeem an existing higher-cost issue.

In a filing with the Securities and Exchange Commission, Chase said proceeds of the offering of six million shares at $25 each may be used to redeem a portion of its outstanding perpetual preferred stock.

Investment bankers close to the deal said the dividend would likely be 8.5%. Most outstanding Chase preferred issues pay dividends of about 9%, and one series pays 10.1%.

Chase expects the new preferred stock, like other preferred offerings, to qualify as Tier 1 capital, which stood at 5.7% of its assets at the end of the first quarter.

Despite persistent problem real estate loans, Chase has gained favor on Wall Street and is on several analysts' "buy" lists. Those votes of confidence, combined with investors' appetite for bank preferred stock, give Chase the opportunity to sell preferred shares at a more favorable rate than in the past.

Merrill Lynch & Co. is lead manager for the Chase deal.

Citicorp Also in Market

Banks recently have been moving to redeem higher-cost securities issues to take advantage of lower interest rates and improved investor sentiment.

Wednesday, Citicorp completed an exchange of common stock for outstanding preferred stock that shaved about $15 million from its annual dividend costs.

Unlike Citicorp, Chase pays dividends on its common stock. But as at Citicorp, Chase's dividend expenses on its preferred stock have escalated in recent years. Chase paid $100 million in dividends to holders of its nonconvertible preferred last year, up from $57.4 million in 1987.

Series E Redemption?

Investment bankers said that one possible preferred issue to be redeemed is the Series E floating-rate preferred stock. The $250 million issue carries a current dividend of 8.9%. This year, Chase issued $150 million in preferred at 9.1%.

"Long term, they want to build capital and boost their debt ratings," said James Hanbury, an analyst at Wertheim Schroeder. "They want to get back into trading and swaps, which you can't be effective in with low debt ratings."

Chase is rated Baa2 by Moody's Investors Service and BBB-plus by Standard & Poor's Corp. To be a major player in trading and derivatives, however, a bank needs at least an A rating.

Boosting Capital and Ratios

The new preferred issue is the latest step in a multiprong approach to rebuilding capital and capital ratios that began last year. Shareholder equity stands at $5.6 billion, up $800 million since the first quarter of 1991.

Assets fell $2.5 billion during the same period, which boosted the Tier 1 capital ratio by 120 basis points. Nonperforming assets, mostly bad real estate loans, accounted for 5.8% of total assets at quarter's end.

In a report issued last month, First Boston Corp. said it expects Chase to issue $500 million to $750 million in common stock this year. Other observers believe Chase must wait until its stock price exceeds book value before issuing more common shares. Chase shares are trading at 89.4% of book value.

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