Agnico-Eagle 2002's top performing new convertible, Adelphia worst, Banc One says

By Peter Heap

New York, Oct. 25 - Agnico-Eagle Mines Ltd.'s 4.5% convertible subordinated debentures due 2012 are the top performing new convertible issue so far this year while Adelphia Communications Corp.'s 7.5% mandatory convertible preferreds due 2004 are the worst performer, according to a new report by Banc One Capital Markets, Inc.

Agnico-Eagle's deal has gained 28.7% on a total return basis from pricing date through Sept. 30 while Adelphia's offering is down 94.3%, analysts Richard Cunniffe, Susan Osborn and Frank Nash wrote.

By comparison, Agnico-Eagle's stock has gained 39.2% over the same period while Adelphia's equity is down 99.5%.

Agnico-Eagle, a Toronto gold mining company, priced $143.75 million of the convertibles (including greenshoe) on Jan. 29 to yield 4.5% with a 14.75% initial conversion premium via Scotia Capital Markets.

Adelphia, a Coudersport, Pa. cable company, priced its $575 million of mandatory convertible preferreds (again including greenshoe) on Jan. 15 to yield 7.5% with a 17.6% initial conversion premium via Salomon Smith Barney.

Overall, zero-coupon convertibles have been the best performing new issues for the first nine months of the year, according to the Banc One analysts.

On average zero-coupon convertibles issued in 2002 have declined 3.3% through Sept. 30 compared to a 23.5% loss for the underlying stocks.

Although zero-coupon securities are usually the worst performing convertibles over time because the conversion price increases as the bond accrues interest, many of the new deals have included short puts, the analysts said. These puts have supported the bonds' prices and minimized exposure to falling equity prices.

As an extra plus, many of the zero-coupon convertibles have been investment grade, which has also helped support their value, Cunniffe, Osborn and Nash said.

Second placed among the 2002 new issues were coupon convertible bonds which declined 12.8% versus 29.8% for their underlying stocks. This group has been helped by many of the new issues having short maturities of five or seven years.

Convertible preferreds placed third with a negative 15.3% total return against negative 27.7% for the stocks while mandatories placed bottom with a negative 18.3% total return against negative 24.6% for the stocks.

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