Citicorp will launch a $250 million issue of noncumulative preferred stock today or Friday, capital markets sources said.

The issue would add roughly 12 basis points to the bank's Tier 1 capital ratio, which was 5.23% at the end of March.

Lehman Brothers will be lead manager of the issue. Market sources said the proposed dividend yield will be around 8%. Lehman Brothers officials were not available, and a Citicorp spokesman declined to comment.

Issue May Stay at Junk Levels

Citicorp preferred stock is rated BBB by Standard & Poor's Corp. It is rated Ba1, the highest junk rating, by Moody's Investors Service.

Moody's said in March that it is reviewing Citicorp's preferred rating for possible upgrade. However, capital markets sources speculated that the new issue may stay at junk levels, because Moody's in the past has rated noncumulative issues one rung lower than cumulative preferred issues.

Under bank regulations, cumulative preferred stock is restricted to 25% of a bank's Tier 1 capital, and Citicorp already exceeds that.

Bankers Trust New York Corp. is also in the market, readying a $150 million securities offering. The issue will start as debt, but the bank may opt to exchange it for preferred stock. The proposed yield is 7.63%.

Moody's Raises Mellon Ratings

In the debt markets on Wednesday, Mellon Bank N.A. issued $150 million of 10-year subordinated notes.

The issue was priced to yield 6.87%, or 75 basis points over 10-year Treasuries. The issue was rated A3 by Moody's and A-minus by Standard & Poor's.

Moody's raised Mellon Bank Corp's senior debt rating to A3 from Baa1, its subordinated debt to Baa1 from Baa2, and its preferred stock to Baa1 from Baa2.

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