Merrill notes negative net issuance of $5 billion year to date on slack in July, heavy redemptions

By Ronda Fears

Nashville, Aug. 3 - Year-to-date net issuance of convertibles sank to negative $5 billion in July due to heavy redemptions in the month and the severe pullback in new convertibles, Merrill Lynch & Co. convertible analyst Tatyana Hube noted in a report Tuesday.

Redemptions remained higher than new issuance in July, which was a meager $1.2 billion, while $4.1 billion in convertibles was taken out of circulation during the month.

Year-to-date total redemptions now stand at $33.5 billion and net new issuance dipped further into negative territory to $5.0 billion. For all of 2003, redemptions totaled $57.9 billion.

For July alone, net issuance was a negative $2.8 billion.

Hube noted in a report Monday that the total market value of the convertible universe dropped by 4%, or by $11.8 billion, to $287.8 billion at the end of July from $299.6 billion at the end of June.

Despite lackluster primary market volume, she noted new-issue terms came cheaper in July compared to those offered in June. The average theoretical discount at-issue increased from 2.2% for June's new deals to 3.2% for May's.

The new-issue index - comprised of new issues priced during the past six months - lost 3.3% in July on the back of a 7.7% drop in its underlying equities during the month. At the same time, the master index lost 2.7% on a 7.0% decline in its underlying equities.

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