Conmed new issue trades stronger; Ryerson Tull, Powerwave head lower

By Sara Rosenberg

New York, Nov. 5 - There was a flurry of activity Friday morning as three new issues - Conmed Corp., Ryerson Tull Inc. and Powerwave Technologies Inc. - started trading around. But out of those three, Conmed was the only issue to post gains after hitting the secondary.

Conmed's new 2.5% 20-year convertible senior subordinated notes (B) were quoted at 102½ bid, 103 offered a little after mid-day, according to a market source. A buy side source said that the deal definitely traded above 103 at some point in the morning and then settled down slightly to around 102 7/8 bid before quieting down in afternoon hours.

The stock closed at $27, up $0.20 on the day.

The $125 million deal came at an initial conversion premium of 42.5%. Price talk was 2.25% to 3.25% with a 40% to 45% initial conversion premium.

"This was the best deal out of the three as far as pricing," the market source said. "It's priced with enough juice to be attractive. And, it does have a rating - B - and it's in the medical device sector which tends to trade tighter."

UBS is the bookrunner on Conmed's Rule144A deal.

Of the proceeds, $90 million will be used to repay borrowings under the Utica, N.Y., medical technology company's senior credit agreement while $30 million will be used to buy back common stock in privately negotiated transactions, possibly including shares sold short by purchasers of the convertible notes. Any remaining proceeds will be used to repay debt and for working capital and general corporate purposes.

Ryerson Tull heads lower

On the flip side, Ryerson Tulls' 3.5% 20-year convertible senior notes were quoted at 98½ bid after mid-day falling from opening levels on Friday morning that included trades taking place right around par, the source said.

The stock closed at $14.26, down $0.48 on the day.

"People were more conservative with the credit assumptions then what the underwriter was pitching," the source explained.

Ryerson Tull's $145 million deal came with an initial conversion premium of 45%. The upsized deal priced at the cheap end of talk, which had put the yield at 3% to 3.5% and the conversion premium at 45% to 50%.

The notes were increased from the $125 million originally announced and were restructured from a senior subordinated ranking.

JPMorgan is the bookrunner on the Rule 144A deal that will be used to repay revolver debt.

Ryerson Tull is a Chicago distributor and processor of metals and other materials.

Powerwave also lower

Powerwave's new 1.875% 20-year subordinated convertible notes were quoted at 98 bid after mid-day, according to the source. The convertible had been re-offered to buyers at 98½ on Friday morning.

The stock closed at $7.70, down $0.23 on the day.

The underwriters "probably gave up the bulk of their fees to get the deal done," the source said. "It was pretty aggressively priced. The stock's off a little bit [too] so that explains that."

The $150 million deal came at an initial conversion premium of 40%.

Deutsche Bank is sole bookrunner on the Rule 144A deal.

Proceeds will be used to fund the purchase of $40 million of the company's common stock and to increase financial flexibility for possible future acquisitions and for general corporate purposes.

Powerwave is a Santa Ana, Calif.-based designer, manufacturer and marketer of ultra-linear radio frequency power amplifiers for use in the wireless communications market.

Caesar's active

Caesars Entertainment Inc.'s floating-rate issue was trading actively in Friday's market at levels that were higher by a couple of a points as investors believe that the conversion offer filed Thursday relating to the merger with Harrah's Entertainment Inc. has a nice amount of upside.

"The bonds are trading as high as 111," a market source said around mid-day. "There was a federal filing that came out last night saying that bondholders have a choice of receiving bond proceeds in stock or in cash and it's on a pro rata basis. So there's the potential to realize more stock than cash. That raises the value of the bonds."

Another trader had the paper quoted at 110.44 bid, 110.69 offered by late in the session, up 1.025 on the day. The stock closed at $18.17, down $0.25 on the day.

The merger has been structured with a "stock cap" under which the number of Caesars' common stock converted into Harrah's common stock will equal 66.42% of the number of shares of Caesars' common stock outstanding immediately prior to the merger, according to an S-3/A filed with the Securities and Exchange Commission.

But, there is also a "cash cap" which limits the amount of cash to be paid to Caesars stockholders.

Therefore, "the stock elections in the merger are subject to proration to preserve this fixed number of shares of Harrah's common stock to be issued and cash to be paid in the merger," the filing explained.

On July 14, Caesar's signed a definitive agreement to merge with Harrah's Operating in a cash and stock transaction under which stockholders will receive either $17.75 in cash or 0.3247 shares of Harrah's common stock for each outstanding share of Caesars' common stock. The transaction remains subject to approvals by Caesar's and Harrah's stockholders and regulatory agencies.

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