AmeriCredit jumps outright on GM takeover; coal names in trade; Genco gains; Apache prices

By Rebecca Melvin

New York, July 22 - AmeriCredit Corp.'s two convertible bond issues jumped from the lower 90s to near par early Thursday on word that General Motors Corp. plans to acquire the auto-financing company for $3.5 million, market sources said.

The AmeriCredit 2.125% convertibles gained 6 or 7 points on an outright basis, and the AmeriCredit 0.75% convertibles gained 1 or 2 points outright. But on a hedged basis, the outcome would depend on the delta at which investors were hedged.

Word that the U.S. Energy Bill was being shelved indefinitely amid disagreement over major provisions like cap and trade, prompted some coal stocks to pick up. They were building on a boost from Peabody Energy Corp.'s positive earnings earlier in the week, with both Peabody and Massey Energy Co. convertibles seen higher in trade, a New York-based sellside desk analyst said.

MGIC Investment Corp.'s convertibles were back in trade and higher as the shares of the Milwaukee-based mortgage insurer edged upward.

In the primary arena, the new Genco Shipping & Trading Ltd. 5% convertibles traded up to 104.5 and were seen at about 104 near the end of their debut trading session.

A syndicate source said it was a blockbuster, and another source said the deal did look cheap but that limited stock borrow was a problem.

Fellow shipping company DryShips Inc. saw its convertibles trade at about 83 on Thursday, which was up from about 81 on Wednesday.

Meanwhile, Apache Corp. priced $1.1 billion of three-year mandatory convertible preferred stock with a dividend of 6% and an initial conversion premium of 24%.

AmeriCredit jumps outright

AmeriCredit's 0.75% convertibles due 2011 traded at as high as 99.25 on Thursday, up from its last trades at 96.9.

The AmeriCredit 2.125% convertibles due 2013 also traded up to 99.25, a gain of 6 or 7 points from 92.398 last.

Both issues have a change-of-control put. The 0.75% paper was early in the day at 98.5 bid, 99.25 offered, while the 2.125% convertibles were 99 bid.

"It's most likely going to trade on a yield to when people think the deal gets done," a Connecticut-based sellside trader said

Both issues had been ticking up in recent weeks after large drops in May.

Shares of the Fort Worth, Texas-based auto-financing business jumped 22% in pre-market trading, and ended the day up 21%, or $4.21, at $23.91.

GM and AmeriCredit announced a definitive agreement for GM to acquire AmeriCredit with an eye toward helping GM "meet customer demand for leasing and non-prime financing for GM vehicles."

"This acquisition supports our efforts to design, build and sell the world's best vehicles by expanding the financing options we can offer to consumers who want to buy GM vehicles," said GM chairman and chief executive Ed Whitacre.

"Adding AmeriCredit to our team will improve our competitiveness in auto financing offerings, and I am very pleased to have them on board," Whitacre said.

GM has not had an in-house auto lending arm since it sold control of its GMAC finance arm in 2006.

GM also plans to go public again this fall.

Genco jumps to 104 on debut

Genco's newly priced 5% convertibles due 2015 traded as high as 104.5 in early trading and ended the session at about 104, a syndicate source said.

Shares of the New York-based transporter of drybulk cargoes gained 30 cents, or 1.9%, to $16.48 on Thursday.

The deal did very well, the syndicate source said.

Genco priced an upsized $110 million of five-year convertible senior notes after the close of markets Wednesday.

The registered deal priced at the cheap end of talk for the coupon, which was 4.5% to 5%, and at the midpoint of price talk for the initial conversion premium, which was 20% to 25%.

Initially, the deal was going to be $100 million in size.

Genco also sold $60 million of common stock, or 3.125 million shares at $16.00 per share.

Deutsche Bank Securities Inc., BNP Paribas Securities Corp. and Credit Suisse Securities (USA) LLC were the joint bookrunners for the offerings, with Credit Agricole Securities (USA) Inc., DVB Capital Markets LLC and Knight Capital Markets LLC acting as the co-managers for the offerings.

Proceeds from both offerings will be used to fund a portion of the purchase price for Genco's previously announced acquisitions of 13 drybulk vessels from Bourbon SA and five drybulk vessels from affiliates of Metrostar Management Corp., as well as for general corporate purposes.

Apache prices on the rich end

Apache priced its $1.1 billion of 6% mandatory preferreds at par with a 24% initial conversion premium. That compared to talk, which was for a dividend of 6% to 6.5% and an initial conversion premium of 18% to 22%.

The paper was trading Thursday in the gray market at between 50.75 and 50.5, which was up a little bit from the plus 1 bid in the gray market on Wednesday.

The company Thursday also priced 23 million shares of common stock at $88.00 per share.

Shares of the Houston-based oil and gas exploration and production company closed up $1.83, or 2%, at $89.28.

The mandatory deal was said to be viewed favorably by certain hedge strategies and by crossover equity participants.

"We are definitely evaluating Apache. It's our cup of tea," a New York-based buysider said.

Mandatories are typically good for more equity-like convertible strategies, offering good upside if the underlying stock moves up and also relatively high yields.

They are also good for strategies that require investment-grade holdings since most mandatories are investment grade.

But mandatories are inappropriate for more defensive convertible strategies, because the mandatory conversion feature means that there's ultimately no downside protection for the principal, although the yield advantage effectively provides some downside protection relative to the common stock.

Massey, Peabody up on bill changes

Massey Energy's 3.25% convertibles due 2015, which trade outright, changed hands at 85 on Thursday and also at 85.5, which was up 1.625 points from previous levels.

Massey Energy's 2.25% convertibles due 2024 weren't heard in trade and were last seen in the low 80s.

Shares of the Richmond, Va.-based coal producer gained $1.49, or 5%, to $29.91.

Peabody Energy's 4.75% convertibles due 2066 traded at 108.25 versus a share price of $45.25. Shares of the St. Louis-based coal producer jumped $2.20, or 5.1%, to $45.23.

Peabody's positive earnings news earlier in the week didn't prompt much in the way of coal name trades, but word that any future energy bill will need to be scaled down sent shares and convertibles higher. Oil prices were also higher on the day.

"Some coal stocks were up on changes to the energy bill," a New York-based sellsider said.

Mentioned in this article:

AmeriCredit Corp. NYSE: ACF

Apache Corp. NYSE: APA

DryShips Inc. Nasdaq: DRYS

Genco Shipping & Trading Ltd. NYSE: GNK

Massey Energy Corp. NYSE: MEE

MGIC Investment Corp. NYSE: MTG

Peabody Energy Corp. NYSE: BTU

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