Scientific Games at par in gray market; Cray, American Equity deals advanced, soar out of gate

By Ronda Fears

Nashville, Dec. 1 - New issues kept pouring into the convertible market - trouble-free insofar as demand remained healthy in the face of the onslaught.

"New issues look like they are taking advantage of the piles of cash that must be sitting around, given the terms that are being priced," a sellside trader remarked.

Two deals, from Cray Inc. and American Equity Investment Life Holding Co., were advanced on Wednesday - and both were upsized and still zoomed higher in the immediate aftermarket.

They made room for two more from ASM International NV and Scientific Games Inc., which both emerged before the opening bell rang.

Then, after the close, another deal popped up.

Lexington Corporate Properties Trust launched a $125 million convertible preferred deal late Wednesday. The offering from the New York City based real estate investment trust will be registered and priced off the Bear Stearns & Co. Inc. desk.

Indicative terms on the Lexington deal were being prepped but not available by press time. The REIT's stock closed up 76 cents on the day, or 3.38%, at $20.53.

ASM drive-by picked up

ASM International NV pitched its third convertible to the market and U.S. buyside sources said it was well subscribed despite a brief marketing period and competition with a handful of other new issues.

"This company may not make you rich but then again what has AMAT [Applied Materials Inc.] MOT [Motorola Inc.] or even INTC [Intel Corp.] done for you lately?" one buyside convert trader said.

The $125 million of seven-year convertible subordinated notes priced at par to yield 4.25% with a 35% initial conversion premium - at the cheap end of yield talk for a 3.75% to 4.25% coupon but aggressively outside premium guidance of 27.5% to 32.5%.

The deal launched early Wednesday to price at 11:30 a.m. ET, after the Dutch market close.

Netherlands-based semiconductor equipment maker ASM is redeeming its $115 million of 5% convertible subordinated notes due November 2005 with the proceeds. The 5s were quoted off about 0.375 point to 106.375 bid, 107.375 offered.

Another ASM convert, the 5.25% due 2010, slipped about 0.625 point and was quoted closing at 113.5 bid, 114.5 offered while the stock closed off on the new deal news by 16 cents, or 1%, to $15.74.

"The international semiconductor market is a wiggly one. Thus, the up and down cycles of an international semiconductor equipment manufacturer are often and sometimes dramatic," said another buyside trader, who owns old and new ASM converts.

"ASM has survived many dips and a few outright attacks. I'm not making a David-and-Goliath comparison but this is a small company and in recent years has regained a bit of their past in grabbing chunks of useful technology, either by investments or internally, to emerge in 2004 holding something important for the future."

Scientific Games seen rich

At the open, Scientific Games Inc. also launched a drive-by deal that many buyside sources saw as expensive, although it was well subscribed and active in the gray market.

The $225 million of 20-year convertible notes were talked to yield 0.5% to 1.0%, which would step-down by 25 basis points at December 2010, with a 27.5% to 32.5% initial conversion premium, according to buyside sources. The quick-sale deal was pricing after the market close Wednesday.

In the gray market, the issue was bid at par or issue price, with an offer of 1.5 points over. The stock lost 62 cents on the day, or 2.59%, to close at $23.28.

"I am not sure exactly how it models up, but you can tell from the market that people think it looks pretty rich," both in terms of where it was trading in the gray market and compared to terms on other recent new issues, said a buyside trader, who was passing on it.

A sellside market source agreed that the deal looked rich but said participation in the deal was reported to be very strong, "mostly because of the sector they're in."

New York City based online betting and video poker company Scientific Games, which also provides ticket machines for lotteries and pari-mutual betting, said it would use proceeds to repay part of the term loan outstanding under its existing senior credit agreement and to finance a tender offer for its 12.5% senior subordinated notes due 2010.

On Thursday, the company also was expected to launch a new $300 million credit facility consisting of a $200 million senior revolver and $100 million senior term loan, according to sources in the bank loan market.

Synaptics, Millicom also at bat

Synaptics Inc. also was on tap after Wednesday's close and, abroad, Millicom International Cellular SA sold a deal off the London desk of Morgan Stanley & Co.

A gray market was not heard for either Synaptics or the Millicom deals, though.

Synaptics was pitching $100 million of 20-year convertible notes talked to yield 0.75% to 1.0% with a 35% to 40% initial conversion premium, and the San Jose, Calif.- based maker of components for notebook computers such as Apple Computer Corp.'s iPod said proceeds might be used for possible acquisitions though none were in the works.

Synaptics shares closed Wednesday down $2.31, or 6%, to $36.09..

Luxembourg based Millicom sold $175 million of five-year convertible notes at par to yield 4.0% with a 50% initial conversion premium - at the middle of price talk for a 3.75% to 4.25% coupon and at the aggressive end of premium guidance for 45% to 50%. The cellular telecommunications company also sold 8 million ordinary shares.

On the Nasdaq, Millicom shares gained $1.08, or 4.87%, Wednesday to close at $23.24. On the Stockholm exchange, Millicom shares ended up 10%.

Cray issue zooms to 108 bid

Cray Inc.'s deal was small but hot and traders said it soared immediately out of the chute by 2 points, steadily climbing to close with a bid of 8 points better than par. It was advanced to price a day early amid heavy orders, which also prompted an upsizing from $60 million to $65 million.

The Seattle-based computer maker sold the 20-year convertible unsecured subordinated notes at par to yield 3.0% with a 37.5% initial conversion premium - at the tight end of guidance for a 3.0% to 3.5% coupon and a 32.5% to 37.5% initial conversion premium.

"The deal, which quite frankly looks reasonable, was a necessary deal," as proceeds were earmarked to support operations, said a buyside trader who bought a chunk of the new convert. "We totally see this as a turnaround story, a lot of people do apparently, so the issue was hot."

Cray shares regained 36 cents on Wednesday, or 10.26%, to close at $3.87.

American Equity goes to 104

American Equity also advanced its deal, by two days, and upped it to $175 million from $125 million.

West Des Moines, Iowa based American Equity sold the 20-year convertible senior unsecured notes at par to yield 5.25% with a 47.5% initial conversion premium - at the cheaper end of coupon guidance for 5.125% to 5.625% and at the middle of premium talk of 45% to 50%.

After trading 2 points over issue price in the gray market late Tuesday, it continued to get bid up after it broke to trade Wednesday. It shot up at least to 104, to which a buyside source who played the deal merely replied, "it worked out well."

American Equity stock slipped another 156 cents on Wednesday, or 1.53%, to end at $9.66.

OMI eases as oil prices drop

OMI Corp.'s had been upsized, too, priced aggressively outside yield talk, and still gained out of the gate, but it eased back a bit Wednesday. A sellside trader attributed the softness to a drop in the Stamford, Conn.-based crude oil tanker company's stock price as oil prices fell sharply, but said there were plenty of buyers for the convert.

"There were a lot of buyers [for the OMI convert] today who were not able to [buy] when it priced because it was hot," he said, referring to the Rule 144A status of the offering.

OMI's $225 million deal, bumped up from $200 million, was printed Tuesday with a 2.875% coupon and 46.5% initial conversion premium - outside yield talk of a 3.75% to 4.2.5% coupon and at the rich end of premium guidance for 42.5% to 47.5%.

It had been bid up as much as 2.5 points over par in the gray market and gained another couple of points from there out of the gate, a buyside trader said.

On Wednesday, though, it snapped back to 102.375 bid, 10-2.875 offered while the stock dropped 84 cents on the day, or 3.93%, to end at $20.53, which was largely attributed to the decline in oil prices.

Crude oil futures made the largest single day decline in more than three years on Wednesday, according to the Associated Press. Oil futures plunged by $3.64 a barrel to settle at $45.49 a barrel - the lowest since Sept. 16 - on the New York Mercantile Exchange.

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