CommScope bid plus 0.875 point over par in gray market; Greater Bay up 0.75 point; Saks about par

By Ronda Fears

Nashville, March 18 - Flow in convertibles was very busy early Thursday but slacked off sharply and abruptly in the afternoon when March Madness - the college basketball tourney - got under way and captured the attentions, and perhaps a few wagers, of many convertible players.

Speaking of captures, the increased possibility of nabbing Osama bin Laden, or a high-ranking al Qaeda official in Pakistan with the assistance of Pakistani forces, was a boon to the markets. The positive development curbed any inclinations to hold short positions, traders said, so the major stock market indexes ended flattish.

There was not a lot of selling as a result of new paper in circulation, dealers said, but trading activity was elevated - at least early in the session. And, most of the week's new issues were higher on the day, or at least steady.

"It was very busy today," one dealer said.

A buyside trader in New Jersey added, "It got very, very quiet in the afternoon, as soon as the tournament started."

Outside of trading in new paper, several desks noted some action in chip issues like Advanced Micro Devices Inc., with good two-way activity on conflicting calls on the underlying stock by equity analysts at Morgan Stanley and SG Cowen. The convertibles as well as the stock ended the day at a wash.

Several of the old standards also were very active, such as Lucent Technologies Inc., firming by 2 to 3 points outright.

Wynn Resorts Ltd. also has been mentioned over the last couple of sessions and was lower Thursday after a string of gains on upbeat projections for gaming in China, although the Las Vegas-based company is still a year away from opening its refurbished Desert Inn - to be renamed Wynn Las Vegas - in Nevada and its Macau project is still on the drawing board.

CommScope bid up slightly

CommScope Inc.'s new convertible, which was at bat after the close, was slightly over par in the gray market, buyside traders said, but there wasn't a great deal of action in the issue. Late in the day, a trader said there was a bid at 0.875 point over issue price for a $1 million chunk of the new deal.

The $225 million of 20-year convertible notes are talked to yield 1.0% to 1.5% with a 30% to 35% initial conversion premium, with proceeds earmarked to take out its old 4% converts due 2006 and repay some of its bank revolver drawn to buy Avaya Inc.'s connectivity unit earlier this year.

At the middle of the guidance, Deutsche Bank Securities analysts put the new CommScope convertible 0.32% rich to 3.63% cheap, using a credit spread of 450 basis points over Libor and 40% volatility.

As a result of the potential call on the 4s, the issue was bumped up 1 point on the day to par bid, 101 offered.

CommScope shares closed the session down $1.17, or 6.68%, to $16.35.

Hickory, N.C.-based CommScope, which makes cable products, said proceeds would be used to retire all its $172.5 million 4% convertible subordinated notes due 2006 at 101.7143 plus accrued interest. The company also said it would use proceeds to repay $25 million of the outstanding revolving credit loans under its senior secured credit facility.

Saks sees good flow, gains

Saks Inc. priced more on the cheap side and Greater Bay Bancorp on the aggressive side, but both firmed a bit from their respective issue price.

The Saks deal was printed with a 2.0% handle and 30% initial conversion premium - at the middle of yield talk for a 1.75% to 2.25% coupon and at the cheap end of premium guidance of 30% to 35%. The upscale retailer made the $200 million offering on a call spread in order to boost the effective conversion premium to 50% and thereby limit dilution impact.

At final terms, Deutsche analysts put the Saks convertible right at fair value to slightly rich, using a credit spread of 240 basis points over Treasuries and 30% volatility.

At the cheap end of price talk, a buyside source had put the Saks convertible 2% to 3% rich, using a credit spread of 200 basis points over Libor and 26% volatility.

At the middle of the guidance, Merrill Lynch & Co. analysts had put it 0.83% rich, using a credit spread of 310 basis points over Treasuries and 30% volatility.

With the final terms more interesting on the cheaper side, trader said there was good flow in the new issue and it ticked up slightly from par. A buyside trader said it opened with a bid of 100.125.

Bookrunner Citigroup Global Markets Inc. closed the Saks convert at 100.75 bid, 101 offered. The issue was seen in the gray market late Wednesday with a bid of 1.5 points below issue price and an offer at 0.25 point over.

Saks shares closed Thursday off 2 cents, or 0.12%, to $16.27.

Greater Bay gains out of gate

Although the Greater Bay Bancorp deal priced more aggressively, on strong orders, buyside market sources said it headed north right out of the gate as players scurried to grab the high-grade paper. The deal was rated Baa3/BBB-, and the market has been bidding up the better credits lately.

It closed up about 0.75 point from issue price.

Greater Bay Bancorp sold $200 million in proceeds of 20-year zero-coupon convertible senior notes at 90.495 for a 0.5% yield to maturity and a 38% initial conversion premium. The notes priced at the middle of yield talk for a 0.25% to 0.75% yield and at the aggressive end of premium guidance of 33% to 38%.

At final terms, Deutsche analysts put the new Greater Bay convertible right at fair value to slightly cheap, using a credit spread of 80 basis points over Treasuries and 28% volatility.

Greater Bay sold the overnight issue on swap with $46.9 million of proceeds used to buy back 1.7 million shares of stock from note purchasers.

Bookrunner Lehman Brothers closed the new convert at 91.25 bid, 92.5 offered.

Greater Bay shares gained a quarter on the day, or 0.91%, to $27.78.

XL, Cytyc, Providian firmer

The popular new XL Capital Ltd. and Cytyc Corp. convertibles continued to do well in the immediate aftermarket, and dealers noted that the new Providian Financial Corp. deal from earlier in the week hit 102.5 on Thursday.

XL Capital's new 6.5% mandatory gained about 0.375 point from par of 25, with the stock closing off by a penny, or 0.01%, to $75.18.

Cytyc's 2.25% bond - the big home run of the week - was steady at about 104 bid, 104.5 offered, as the stock dropped 19 cents on the day, or 0.95%, to $19.79.

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