Ford convertibles rise as sales fall; GM up; EMC continues strong show; Amgen slips; CapLease launches new issue

By Evan Weinberger

New York, Oct. 2 - Lagging sales couldn't drag down Ford Motor Co. convertibles Tuesday. GM Corp. convertibles were also up as the automaker announced a small uptick in sales.

EMC Corp. convertibles continued to rise. Amgen Inc. convertibles saw a slight dip and Kendle International Inc. convertibles moved up Tuesday.

Tuesday began with news that CapLease, Inc. announced the launch of $75 million in convertible senior notes due Oct. 15, 2027 Monday after the market close. The convertibles are talked at a coupon of 7% to 7.5% and an initial conversion premium of 15% to 20%.

There is a $25 million over-allotment option. The convertibles are expected to price Tuesday after the market close.

The convertibles have call protection for the first five years and puts in 2012, 2017 and 2022. There are standard dividend and takeover protections.

CapLease is a New York-based commercial real estate investment trust. CapLease plans to use the proceeds to repurchase shares of its common stock upon closing and for general corporate purposes, including repayment of outstanding debt and new investment.

Coming in after market close was Excel Maritime Carriers Ltd., which announced the launch of $100 million in convertible senior notes due 2027. The convertibles are talked at a coupon of 1.875% to 2.375% and an initial conversion premium of 50% to 55%. There is a $25 million greenshoe.

There is call protection for the first seven years and puts in 2012, 2017 and 2022, as well as a contingent conversion subject to a 125% hurdle. There are standard dividend and takeover protections. The convertibles are scheduled to price Wednesday after the market close.

Excel Maritime Carriers is an Athens, Greece-based seaborne dry bulk transportation company. The company plans to use the proceeds for general corporate purposes, including the possible acquisition of new vessels and paying down debt.

Tuesday was a day for profit taking on the Dow Jones Industrial Average and Standard & Poor's 500, while the Nasdaq saw a slight gain. In economic news, the National Association of Realtors announced that its index of pending sales of existing homes was down 6.5% in August from July and 21.5% from the same point in 2006. Also, Ford reported a 21% drop in sales in September, slightly worse than outside estimates, and auto sales were almost uniformly down for the month.

The Dow slipped 40.24 points, or 0.29%, for a closing level of 14,047.31 Tuesday.

The Nasdaq added 6.12 points, or 0.22%, to close at 2,747.11.

And the S&P 500 slid 0.41 points, or 0.03%, for a 1,546.63 Tuesday.

CapLease deal set for launch

New York-based commercial REIT CapLease may be facing a tough market when its $75 million in convertible senior notes due Oct. 15, 2027 price Tuesday after the market close. The bonds are talked at a coupon of 7% to 7.5% and an initial conversion premium of 15% to 20%.

"It does look cheap theoretically," an analyst said. "If this was a solid company and these were the terms, I'd say they were very good."

But even with the positive feeling on credit since the Federal Reserve rate cut in September, credit remains tight, the analyst pointed out, and real estate continues to take the hit. "The problem is I doubt whether anyone wants to get involved in anything like this," he added.

And, the analyst pointed out, the dividend CapLease pays out is higher than the potential coupon on the convertibles, making the carry poor. That carry will make the convertibles a difficult sell for hedge funds, and the deal doesn't look great for outrights either, he added.

Other analysts were not paying too much attention to the deal, saying that the small size was evidence that the company had probably convinced a few investors to buy the deal.

CapLease stock (NYSE: LSE) stumbled to a 61 cent, or 5.84%, loss for a close of $9.84.

Sales down, Ford up

Dearborn, Mich.-based Ford announced that sales for September declined 21% - a little worse than analysts' estimates - over the same period in 2006 and labor talks with the United Auto Workers union are set to kick off this week. That should've set the stage for a big sell-off in stock and convertibles in a struggling company that is a standard bearer in an industry that is hurt by the decline in home prices and credit issues in general.

But that was not to be, and it left several analysts a little befuddled. Auto sales were up from the two previous months, car companies reported, although they were still slow. And there is that feeling that the worst of the credit crunch is behind the economy.

"Maybe people are just thinking these names have taken enough punishment and the worst is over," one analyst said.

Whatever the cause, Ford's 4.25% convertible senior notes due Dec. 15, 2036 closed at 116.825 versus a closing stock price of $8.57. That more than made up for Monday's losses, when the convertibles closed at 113.75 versus a stock price of $8.23.

Ford stock (NYSE: F) also staged a rally, adding 34 cents, or 4.13%, on the day.

Detroit-based GM saw a 0.3% increase in sales last month and reported no severe impact from September's two-day strike.

GM's 4.5% series A convertible notes due March 11, 2032 (NYSE: GXM) added 4 cents, or 0.19%, to close at $21.04.

The company's 5.25% series B convertible notes due March 11, 2032 (NYSE: GBM) gained 28 cents, or 1.36%, to close at $21.46.

GM's 6.25% convertible senior debentures due July 15, 2033 (NYSE: GPM) gained 52 cents, or 2.14%, for a $24.83 close.

And GM's 1.5% convertible senior debentures due May 31, 2009 (NYSE: GRM) closed at $28.21, a gain of 41 cents, or 1.49%, Tuesday.

GM stock (NYSE: GM) added $1, or 2.77%, to close at $37.05.

EMC convertibles continue to rise

Hopkinton, Mass.-based computer storage supplement producer EMC continues to see good flow into its convertibles and stock.

On Tuesday, EMC's 1.75% convertible senior notes due Dec. 1, 2011 closed at 144 versus a closing stock price of $21.37. They finished trading Monday at 142.25 versus a stock price of $20.81.

EMC's 1.75% convertible senior notes due Dec. 1, 2013 closed Tuesday at 145 5/8 versus a stock price of $21.37. They closed Monday at 144.125 versus a stock price of $20.81.

EMC stock (NYSE: EMC) stretched 56 cents, or 2.69%, on Tuesday.

Amgen slides

There was some slippage in Amgen's convertibles Tuesday. The Thousand Oaks, Calif.-based biopharmaceutical firm has seen two downgrades in the past two days as the company awaits results on a postmenopausal osteoporosis drug slated to be released in February.

Amgen's 0.125% convertible senior notes due Feb. 1, 2011 slid to 93.125 versus a closing stock price of $56.04. They finished trading Monday at 93.375 versus a stock price of $56.41.

Amgen's 0.375% convertible senior notes due Feb. 1, 2013 closed at 91.75 versus a stock price of $56.04 Tuesday. They finished trading Monday at 91.75 versus a stock price of $56.41.

Amgen stock (Nasdaq: AMGN) skidded to a 37 cent, or 0.65%, loss Tuesday.

Kendle glides

Cincinnati-based clinical research firm Kendle had a good market day all around. Kendle's 3.375% convertible senior notes due July 15, 2012 closed at 112.25 versus a closing stock price of $42.99. They finished trading Monday at 111.756 versus a stock price of $42.75.

Kendle stock (Nasdaq: KNDL) moved up 24 cents, or 0.56%, on Tuesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.