Planned Jarden near issue price in gray market; existing Jarden lower; Apollo REIT on tap

By Rebecca Melvin

New York, March 11 - Jarden Corp.'s planned $600 million of 20-year convertible bonds traded in the gray market Tuesday ahead of final terms being fixed right around the issue price, or at about 99.875 bid, 100.125 offered, market sources said.

"It traded and it was being offered at par and an eighth," one market source said.

The deal was looking rich for investors at the midpoint of talk, which was for a coupon of 1% to 1.25% and an initial conversion premium of 20% to 25%, several sources said.

Jarden's existing 1.875% convertibles due 2018, which is the older of two existing Jarden convertibles, traded at 141.71 early Tuesday, which was down about 3 points on the day on an outright basis. At the end of the day, the older Jarden bond traded at 141.25 versus an underlying share price of $61.35, a trader said.

Also expected to price after the market close on Tuesday was Apollo Commercial Real Estate Finance Inc.'s $100 million of five-year convertible senior notes, which were talked at a 5.75% to 6.25% coupon and a 10% to 15% initial conversion premium. But that deal was quiet in the gray market ahead of final terms being fixed, and there wasn't much chatter surrounding it, probably due to its smallish size.

Elsewhere, Tesla Motors Inc.'s older convertibles were seen "slightly better" on a dollar-neutral basis, a New York-based trader said. Tesla shares were lower. In news on Tuesday, the New Jersey Motor Vehicle Commission approved a rule change that requires auto retailers in the state to have a franchise agreement with an auto manufacturer to be granted a license to sell cars in the state. The move forces Tesla - with its direct sales approach - to end all electric car sales in New Jersey by April 1.

Alpha Natural Resources Inc.'s 3.75% convertibles due 2017 continued to trade actively on Tuesday, finishing the session with bonds changing hands at 87.125, according to Trace data, while Alpha Natural shares sank into the market close, ending the session down 22 cents, or 4.75%, at $4.41.

"The bonds have been pounded recently," a New York-based trader said. Two weeks ago, on Feb. 24, the bonds changed hands at 93, according to Trace data.

Overall, market action was a little busier compared to Monday's moribund session, but Jarden aside, the secondary market was still pretty quiet, a trader said.

In Europe, volatility remained somewhat elevated amid tensions between Russia and Ukraine even though conflict in that region was viewed as a "low-probability event," Barclays convertibles analysts wrote in their weekly report dated March 10.

Still Europe's reliance on Russian gas, and the fact that a lot of it is supplied via Ukraine, makes Europe vulnerable to potential disruptions. It covers more than 30% of Europe's total needs and 50% of it transits through Ukraine, according to the Barclays report.

Should a sell-off occur amid stronger tensions, the analysts said that convertibles with more resilient valuations include Cofinimmo 3.125% convertibles due 2016, Industrivarden's 1.875% convertibles due 2017, Suez Environnement's 0% convertibles due 2020 and Lukoil's 2.625% convertibles due 2015.

The S&P 500 ended down 9.54 points, or 0.5%, to 1,867.6; the Dow Jones industrial average closed down 67.43 points, or 0.4%, to 16,351.25; and the Nasdaq stock market lost 27.26 points, or 0.6%, to 4,307.19.

Planned Jarden around par

Jarden's planned 20-year convertible bonds traded in the gray market at about 99.875 bid, 100.125 offered, market sources said.

The Jarden deal was seen worth 99.9 at the midpoint of talk, using a credit spread of 300 basis points over Libor and a 25% vol., according to one Connecticut-based trader.

A second source said the convertible deal modeled rich using a tighter spread and 25% vol.

Jarden, a Rye, N.Y.-based consumer products company, planned to sell the $600 million deal under Rule 144A via joint bookrunners Barclays, Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC.

There is a $90 million greenshoe.

The notes are non-callable for 10 years and then provisionally callable from March 18, 2024 if shares exceed 130% of the conversion price. There is a put on March 15, 2024.

Proceeds will be used to repurchase up to $250 million of common stock under the company's stock repurchase program with the remainder for general corporate purposes, including repayment of debt.

Existing Jarden lower

Jarden's two existing convertible bond issues were getting a look.

Jarden's 1.875% convertibles were seen trading "in the Street" right before the market close at 141.625 with the underlying shares at $61.35.

That was down nearly 3 points on an outright basis from where the paper was seen going out on Monday at 144.5.

The existing Jarden 1.5% convertibles due 2019 went out Monday at 124.5, a syndicate source said.

The new bonds have a different profile in that they are much longer dated and more balanced and might spur rotation into the new one from the old ones, the syndicate source said.

Mentioned in this article:

Alpha Natural Resources Inc. NYSE: ANR

Apollo Commercial Real Estate Finance Inc. NYSE: ARI

Jarden Corp. NYSE: JAH

Tesla Motors Inc. Nasdaq: TSLA

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