KeyCorp strengthens; US Airways moves up; Beazer unchanged; GLG, Great Plains to price

By Rebecca Melvin

New York, May 11 - KeyCorp's convertible preferred shares were higher Monday as its common shares moved lower after the Cleveland-based regional bank announced that it planned to sell up to $750 million of stock in a so-called "at the market" offering.

The newly priced US Airways Group Inc. convertible, an upsized $150 million of 7.25% deal that came to market late Thursday, moved higher along with the company's shares but not in huge volume.

Beazer Homes USA Inc.'s convertibles were in trade at levels that were little changed as its shares strengthened from early weakness.

Overall, the convertibles market was called fairly quiet Monday, but resilient despite stocks' weakness since converts' moves upward weren't as dramatic as equities, and likewise their downturns weren't expected to be as weighty either.

In the primary market, two new issues emerged after the close. GLG Partners Inc. plans to price $180 million of five-year convertibles ahead of the markets' open Tuesday. And Great Plains Energy Inc. plans to price $250 million of convertible equity units after the close Tuesday.

KeyCorp adds, shares drop

Word of a stock sale took KeyCorp shares lower, understandably, but the bank's convertible preferreds were a little stronger.

The KeyCorp 7.75% perpetual convertible preferreds were seen early at around 68 bid against $6.50 on the stock, and they closed at 65.75, versus shares that were down 69 cents, or 10%, at $6.28.

The initial level was seen 22.5 points over parity and the ending level was higher, at 25 or 26 points over parity.

"There's a lot of hedging going on. The tough part is knowing what people are doing. They could be shorting stock. But I think people are pretty bullish," a New York-based sellside trader said.

Monday's announcement of the sale of up to $750 million of common shares was the first leg of KeyCorp's action plan for increasing its Tier 1 common equity capital, which the U.S. government says needs increasing by $1.8 billion.

The widely-reported government stress tests, or Supervisory Capital Assessment Program, of the largest 19 U.S. bank holding companies were, according to the government, a "what-if" exercise to determine appropriate levels of capital for a worse than anticipated economic environment.

"Although KeyCorp meets the regulatory requirements for being 'well-capitalized' today, and holds capital significantly in excess of all required regulatory measures, under the 'what-if' scenario of a much harsher economic environment, the stress test determined that Key would be best served by raising the level of its Tier 1 common equity," the company said in a release.

Cleveland-based KeyCorp is a regional bank with $97 billion of assets.

US Airways edges higher

US Airway's newly priced 7.25% convertibles due 2014 traded at 101 bid, 103 offered early Monday, and were later seen 104 bid, 105 offered.

One sellsider quoted a trade at 104.5 versus a $3.75 stock price.

But they were not very active, another sellsider said.

The gain came in tandem with a 6 cent, or 1.6% rise in US Airways' underlying shares to $3.75.

The Tempe, Ariz.-based air carrier's gain came despite losses notched for most airline stocks on Monday.

"They were strong, but I haven't seen any. They have been much quieter than any of the other new issues," a sellsider said.

Beazer trades unchanged

Beazer's 4.625% convertibles due 2024 traded little changed at 50 bid, 51 offered on Monday as its shares added 13 cents, or 4.3%, to $3.19.

"I traded some Beazers. There wasn't anything earth shattering today. It was pretty flat, stocks were down. With all the momentum, converts didn't reverse a whole lot. I didn't notice a ton of weakness," a sellsider said.

Two issues to price Tuesday

GLG Partners plans to price an offering of convertibles ahead of the markets' open Tuesday, in an overnight deal talked to yield 5% with an initial conversion premium of 20%.

About $30 million of the $180 million offering will be purchased by company insiders, sources said.

The bonds, which are being sold via bookrunners Credit Suisse and Citigroup, also have a $27 million greenshoe.

The bonds will be non-callable for three years, and provisionally callable after that at subject to a 150% trading price hurdle.

There is a change of control put via a make-whole table, but no make whole upon delisting.

Proceeds are expected to be used to repurchase up to $285 million of $570 million of bank loans outstanding.

GLG is a London-based alternative asset manager.

Another deal is expected to price post-close Tuesday. Great Plains Energy plans to sell $250 million of convertible mandatories, which were talked to yield 12% to 12.5% with an initial conversion premium of 15% to 20%.

The electric utility holding company also plans to price 10 million shares, or about $150 million, for a combined capital raise of about $400 million.

Goldman, Sachs & Co. and J.P. Morgan Securities Inc. are acting as the joint book-running managers for both offerings, which are being made under a shelf registration statement.

Proceeds from the two offerings are expected to repay some or all of the company's borrowings under a revolving credit facility and to make contributions of capital to Kansas City Power & Light Co. and KCP&L Greater Missouri Operations Co. for general corporate purposes, including the repayment of all or a portion of KCP&L's outstanding commercial paper, the repayment of all or a portion of borrowings under GMO's revolving credit facilities and the funding of construction expenditures.

Kansas City, Mo.-based Great Plains is the holding company of regulated utilities Kansas City Power & Light and KCP&L Greater Missouri Operations.

Mentioned in this article:

Beazer Homes USA Inc. NYSE: BZH

KeyCorp NYSE: KEY

GGP Partners Inc. NYSE: GGP

Great Plains Energy Inc. NYSE: GXP

US Airways Group Inc. NYSE: LCC

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