CEDC prints at 25; Alcoa slips 0.25 point on hedge; MGIC moves with shares; SunPower adds

By Rebecca Melvin

New York, April 9 - Central European Distribution Corp.'s 3% convertibles changed hands little changed at 25 on Tuesday after news that the Mount Laurel, N.J.-based vodka maker and supplier's Chapter 11 plan of reorganization will be heard in court May 13, a month after its bankruptcy case was filed.

Alcoa Inc., which reported "decent earnings" on Monday, saw its 5.25% convertibles contract about 0.25 point on a dollar neutral, or hedged, basis, a New York-based trader said.

Neither the CEDC nor Alcoa issues were overly active.

"Some trades went up yesterday," the trader said of Alcoa. "Volume was not very dramatic. But earnings were good, which is negative for vol. given that these were fully priced to begin with."

He thought Alcoa's volatility would trend down following improved performance, which is negative for the convertible instrument's valuation.

Among the session's most actively traded names, Medtronic Inc.'s 1.625% convertible traded little changed at 100.1 to 100.2 ahead of its April 15 maturity.

"It looks like these are going to have a par maturity," a New York-based trader said. "Someone may be paying a penny or two for what's left of carry, but essentially it's par."

Starwood Property Trust Inc.'s 4.55% convertibles, which priced Feb. 11, were also active and a little higher despite lower shares. The Greenwich, Conn.-based mortgage loan investor priced a secondary offering of common stock. Starwood also cut the spread on a $300 million term loan to Libor plus 275 bps from Libor plus 325 bps.

MGIC Investment Corp.'s convertibles traded down in line with the underlying shares of the Milwaukee-based mortgage insurer. The move was opposite of Monday's action in both securities, amid no particular news on either day, a Connecticut-based trader said.

Solar names were in focus in the broader markets with a strong rally on the equity side of things. Most convertibles were left untouched, but SunPower Corp.'s 4.5% convertible traded early at 99.5ish and later at 101.375, according to traders.

Overall, trading action was targeted, and there was no new issuance for a second day this week.

"We're in an in-between period right now," a trader said. "There are not a lot of catalysts; we are several weeks away from significant earnings, and we've had no new issuance yet this week."

CEDC little changed at 25

Central European Distribution's 3% convertibles, which were due March 15, printed at 25 and were left 25 bid, 30 offered on Tuesday. The estimated recovery for these convertibles under the plan of reorganization is about 35, according to the company.

CEDC shares fell by nearly 5 cents, or 26%, to $0.14.

The bonds had collapsed to 14 bid, 15 offered at the end of February when the stock was about $0.65. Prompting the drop at that time was talk about restructuring instead of the March 15 redemption.

The company filed for bankruptcy on Sunday. On Tuesday, a bankruptcy court hearing was set to consider its investment agreement with Roust Trading Ltd., which is headed by Roustam Tariko, on April 29, and the reorganization plan confirmation hearing was set for May 13.

Bankruptcy court judge Christopher Sontchi was quoted as saying that the reorganization was "a true pre-pack plan with overwhelming creditor support."

The restructuring will give Roust Trading 100% of the outstanding stock of the reorganized company.

Roust has agreed to invest $172 million in CEDC and to terminate a $50 million credit facility in exchange for equity in the reorganized company.

Under the investment agreement, Roust is to receive a $10 million breakup fee and up to $3.5 million expense reimbursement if the company selects a superior proposal.

Under the plan terms - which holders of the 2013 and 2016 notes voted 99% and 97%, respectively, in support of - holders of the existing 2013 notes other than Roust Trading who participate in a separate offer by Roust Trading will receive total consideration of $55 million, comprised of $25 million of cash and $30 million of Roust Trading notes, which collectively will afford these holders an estimated recovery of 34.9%; according to the plan.

Holders of existing 2013 notes that do not participate in Roust Trading's offer will receive their share of $16.9 million of cash under the plan.

Holders of existing 2013 notes that participate in Roust Trading's offer will not receive a distribution from the company or its U.S. subsidiaries.

MGIC converts 'mirror' shares

MGIC's 5% convertible senior notes due 2017 traded actively early Tuesday and ended the session 99 bid, 101 offered. They had been right around par prior to Tuesday.

MGIC's 2% convertible traded actively and ended the session at 105 bid, 106 offered, which was down a couple of points on the day.

MGIC shares fell 30 cents, or 5.5%, to $5.15.

The movement of the convertibles "mirrored the stock," a Connecticut-based trader said.

"They were up big yesterday and in today," the trader said, attributing moves in the convertibles to the effects of the capital raised through the 2% convertible.

The stock "came in hard" early in the day after popping on Monday, the trader said.

SunPower jumps

SunPower's 4.5% convertibles due 2015 traded up to 101.375 with the stock at $11.24. That was up from earlier in the session when the convertible changed hands at 99.5 with the stock around the same level.

SunPower shares surged $1.66, or 17%, to $11.39.

Other solar convertibles such as Trina Solar Ltd.'s 4% convertibles due in July and JA Solar Holdings Co. Ltd.'s 4.5% convertibles due in May were not heard in trade. Suntech Power Holdings Co. Ltd.'s 3% convertibles matured March 15.

The equities of those names were in rally mode after First Solar Inc., which saw its shares surge by 50% intraday, provided higher-than-expected guidance for 2013 earnings. First Solar estimated that its 2013 earnings per share would be $4.00 to $4.50 versus analysts' estimates of $3.46 on a consensus basis.

The guidance excludes up to $10 million of restructuring expenses. The company anticipates that its 2013 revenue will also be higher than expected. It expects to ship 1.6 gigawatts to 1.8 gigawatts of solar modules for the year. The earnings forecast for 2014 was in line with previous estimated levels.

Mentioned in this article:

Alcoa Inc. NYSE: AA

Central European Distribution Corp. Nasdaq: CEDC

JA Solar Holdings Co. Nasdaq: ADS: JASO

Medtronic Inc. NYSE: MDT

MGIC Investment Corp. NYSE: MTG

Starwood Property Trust Inc. Nasdaq: STWD

SunPower Corp. Nasdaq: SPWR

Trina Solar Ltd. NYSE: SDS: TSL

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