Synovus moves up on debut; BorgWarner, Interpublic Group add on earnings; Mylan steady

By Rebecca Melvin

New York, April 29 - Synovus Financial Corp.'s newly priced tangible equity units dominated trading in the convertibles market Thursday, moving up on their debut in the secondary market as Synovus' common shares opened lower and then pulled up to about the unchanged mark.

Elsewhere, earnings drove much of the trading in a session that was otherwise described as quiet.

A rally in equities was viewed as positive in some respects, but perhaps overdone or otherwise mainly a bounce back from being knocked down by the Goldman Sachs hearings earlier in the week.

The Nasdaq Stock Market gained 40.19 points, or 1.6%, to 2,511.92; the S&P 500 index rose 15.42 points, or 1.3% to 1,206.78; and the Dow Jones Industrial Average added 122.05 points, or 1.1%, to 22,267.32.

"It ripped today," a New York-based sellside trader said of the stock markets. "I like it for some of my personal accounts, but it seems like it's starting to get overblown."

BorgWarner Inc.'s 3.5% convertibles due 2012 moved up about 10 points along with a surge in their underlying shares after the Auburn Hills, Mich.-based maker of automotive power trains swung to a first-quarter profit and raised its outlook for the year, citing "fundamental improvements" in automotive production.

Interpublic Group of Companies Inc. was also in trade and edging up with their shares after the New York based advertising company reported a worse-than-expected loss for the first quarter on revenue that was 1.2% higher as expected.

S&P said that it may upgrade Interpublic's ratings due to continued improvement in operating performance in the first quarter and recent actions taken to improve liquidity like reducing debt through its tender for its convertible preferred stock.

Mylan Inc.'s convertibles were steady, or higher on a dollar-neutral basis, on weaker shares early in the session. But the shares clawed back to the flat line during the session after the Canonsburg, Pa.-based generic drugmaker posted a lower profit for its first quarter, but excluding items came in better than expected. The company maintained its full-year outlook.

"They looked like they traded a couple points higher," a sellsider said, quoting the Mylan 3.75% convertibles at 175 versus a share price of $21.71.

MGIC Investment Corp., which priced its 5% convertibles last week, was seen in trade at 113 versus a share price of $10.65, which was up compared to 107.75 versus a share price of $9.90 on Wednesday and 111.5 versus a share price of $10.60 on Tuesday.

QBE on tap

In overseas action, QBE Insurance Group Ltd., through a trust, planned to price $700 million of 20-year convertible senior unsecured notes Thursday, with a coupon talked at 2% to 2.5% and an initial conversion premium at 30%.

Bank of America Merrill Lynch is the bookrunner and will work with RBS as joint lead managers on the Regulation S offering from the Sydney-based insurance company.

The notes have a contingent payment subject to a hurdle at 130% of the principal.

The notes are non-callable for the first three years, and they may be put in years three, five, seven, 10 and 15.

There is dividend and takeover protection.

Proceeds will be used to redeem existing convertible debt on May 17 and for general corporate purposes.

London-based Barclays Capital analyst Heather Beattie said that the valuation of the new QBE convertible was "not very compelling," but that its high bond floor and investment-grade rating provided support.

"We value the new convertible at 61.6 to 67.2 versus an issue price of 60.8 to 67.1," Beattie wrote in a note.

Synovus trades up

Synovus' newly price 8.25% tangible equity units due 2013 moved up on their debut, trading at $28.375 versus a share price of $3.17, from a par price $25 on the units.

The new units were initially bid at 26.5, and with lots of volume in the range of 26.875 bid, 27.25 offered range, and then seen in trade at 27.375.

Shares of the Columbus, Ga.-based financial services holding company opened sharply lower after pricing $700 million of common shares at a 13.5% discount to Wednesday's close. They then moved up to straddle the flat line and closed higher by 2 cents, or 0.63%, at $3.20.

"It's moving better than delta by the earlier trades. It moved up on a 100% [delta], from what I can tell," a New York-based sellside trader said.

Synovus priced an upsized $300 million of three-year tangible equity units late Wednesday with a distribution fee of 8.25% and an initial conversion premium of 20%.

The registered offering was originally talked at $200 million in size.

The deal came at the rich end of talk, which was 8.25% to 8.75%, with a premium of 15% to 20%, and there is a $45 million greenshoe.

Synovus' common stock priced at $2.75 each.

Proceeds from the offerings will be used for working capital and general corporate purposes.

J.P. Morgan Securities Inc. was the bookrunner for the offerings.

Fitch Ratings said it affirmed the BB- long-term issuer default ratings of Synovus and its subsidiary banks following news of its capital raise.

The outlook remains negative, however, Fitch said. It considers the capital enhancements necessary given the company's persistent asset quality challenges, credit exposure to troubled regions and other ongoing concerns.

Mylan steady

Mylan's 3.75% convertibles were 175 bid versus a share price of $21.71 early in the session Thursday, and later traded at that level, which was little changed from previous levels.

Mylan's 1.25% convertibles due 2012 were reported in trade on Wednesday at 109, which was little changed from where they were indicated to have closed on Thursday.

Excluding items, Mylan earned 36 cents per share, which beat the analysts' consensus estimate of 34 cents a share. But Mylan said it continues to project 2010 earnings in a range of $1.50 per share to $1.70 per share.

The company said it expects the majority of its 2010 earnings growth and gross margin improvement to come in the second half of the year.

Net income for the world's third-largest generic drugmaker fell to $61.1 million, or 20 cents per share, from $71.3 million, or 23 cents per share, a year earlier. Revenue rose 7% to $1.29 billion, which was what analysts expected.

The company said it still expects full-year revenue of $5.45 billion to $5.75 billion.

Mylan's overseas sales countered a 5% decline in North American revenue to $562.7 million. Revenue rose nearly 15% in the region including Europe, the Middle East and Africa, helped by performance in Italy, France and Spain. And sales in the Asia Pacific region jumped nearly 31%.

Kenneth Lim contributed to this report

Mentioned in this article:

BorgWarner Inc. NYSE: BWA

Interpublic Group of Cos. Inc. NYSE: IPG

MGIC Investment Corp. NYSE: MTG

Mylan Laboratories Inc. NYSE: MYL

QBE Insurance Group Ltd. Frankfurt: QBE

Synovus Financial Corp. NYSE: SNV

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