Scottish Re gains on buyout bids; ImClone rallies with stock; AmeriCredit, Bristow lead wave of new deals

By Kenneth Lim

Boston, Sept. 11 - The convertible bond market had a quiet start to the week in Monday's session, with Scottish Re Group Ltd. gaining after the company said it had received several takeover offers.

ImClone Systems Inc., meanwhile, rose slightly outright on the back of a stock rally late in the day.

Monday's stillness could turn out to be the calm before the storm, with a wave of new issues launched after the market closed. Bristow Group Inc. relaunched its $200 million of three-year mandatory convertible preferreds and plans to price the deal on Wednesday, the same day as Triumph Group Inc.'s newly announced $175 million offering.

AmeriCredit Corp.'s $500 million two-tranche offering is expected to price on Tuesday, as is Corporate Office Properties Trust's $175 million deal.

Scottish Re gains on buyout talk

Scottish Re's 4.5% convertible due 2022 rose about 2.75 points on Tuesday after the emergence of potential buyers for the company raised confidence in the reinsurer's ability to honor the note's December put.

The convertible traded at 98 on Tuesday, while Scottish Re stock (NYSE: SCT) gained 12.03% or $1.12 to close at $10.43.

"At 98 it's an extremely large, fat yield-to-put," a sellside convertible bond trader said.

Bermuda-headquartered Scottish Re on Monday said it is on track to complete an auction process for a possible sale of the company, which recently suffered credit ratings downgrades after reporting a surprisingly large loss. The company said it also is reviewing options to address short-term liquidity pressures.

Scottish Re said it received buyout offers from "a number of potential bidders" on Friday, and an announcement of a transaction could be made as early as mid-October to early November. The company said it also plans to raise between $150 million and $250 million to address short-term liquidity pressures, and it has already received three proposals for possible financing.

"I don't think there's any doubt that there's interested buyers in this," the trader said.

The trader said there was a strong chance that Scottish Re will be able to sell itself. Unlike ImClone, which took itself off the block after it did not receive any satisfactory offers, Scottish Re is in more dire straits and will be less picky about the offers it gets.

"They're not in any shape to get argumentative," the trader said. "They're not like ImClone, which still had a number of options...This is a more plausible deal."

With an announcement of a new owner more likely, holders of the 4.5% convertible should be more confident that the company will be able to pay off the put in December, the trader said. Even at 98, the convertible has room on the upside, the trader reckoned.

"This is probably an extraordinary return considering that December 2006 is the put," the trader said. "This is a three-month piece of paper."

ImClone up with stock

ImClone's 1.375% convertible due 2024 improved about a point outright on Monday after the stock climbed in afternoon trading.

The convertible was 87.5 bid, 87.75 offered with the stock around $28.25. ImClone stock (Nasdaq: IMCL) gained 2.15% or 60 cents to end at $28.54.

"They're up, but I can't figure out why," a convertible bond trader said. "It's mysterious to me."

A sellside convertible bond analyst, who was also puzzled by the stock's Monday gain, said the shares may simply have had a mild recovery from the previous week's retreat. Recent reports speculated that ImClone may take not win a pending patent trial involving its cancer drug Erbitux.

More deals to come

The primary market burst into life on Monday after the secondary market shut down for the day, with four deals launched and expected to price over two days this week.

The biggest deal came from AmeriCredit, which plans to price on Tuesday after the market closes a two-tranche $500 million offering of convertible senior notes. The five-year tranche is talked at a coupon of 0.625% to 1.125% and an initial conversion premium of 13% to 17%, while the seven-year tranche is talked at a coupon of 2% to 2.5% and an initial conversion premium of 23% to 27%.

Each series has an over-allotment option for a further $25 million.

JP Morgan, Credit Suisse and Deutsche Bank are the bookrunners of the Rule 144A deals.

AmeriCredit, a Fort Worth, Texas-based finance company, said it will use the proceeds of the offering to buy back $200 million of its common stock and to enter into convertible note hedge and warrant transactions. The rest of the proceeds will be used for general corporate purposes.

AmeriCredit stock (NYSE: ACF) closed at $22.43 on Monday, a 0.09% or 2 cent gain before the deal was announced.

Also pricing on Tuesday after the close is Corporate Office's planned $175 million of 20-year exchangeable senior notes talked at a coupon of 3.125% to 3.625% and an initial exchange premium of 20% to 25%.

The notes, the latest by a real estate investment trust, will be offered by the company's operating partnership, Corporate Office Properties LP, and be exchangeable into common stock of the listed company.

There is a greenshoe option for a further $25 million.

Bank of America and JP Morgan are the bookrunners of the Rule 144A offering.

Corporate Office Properties, a Columbia, Md.-based developer of suburban office properties, said it will use the proceeds of the deal to repay several construction loans and an unsecured revolving credit line.

Corporate Office Properties stock (NYSE: OFC) slipped 0.11% or five cents and closed at $46.20 on Monday before the deal was announced.

On Wednesday, Bristow plans to price $200 million of three-year mandatory convertible preferred stock, talked at a dividend of 5.25% to 5.75% and a threshold appreciation range of 20% to 25%.

Bristow relaunched the deal on Monday after an initial launch in August. The deal comprises 4 million preferred shares, which will be offered at $50 apiece, with a greenshoe for a further $30 million, or 600,000 preferred shares.

Credit Suisse and Goldman Sachs are the bookrunners of the registered off-the-shelf deal. Credit Suisse was originally the sole bookrunner.

Bristow, a Houston-based provider of helicopter services to the offshore oil and gas industry, plans to use the proceeds of the deal to fund aircraft purchases. Upon the completion of the offering, Bristow will exercise options it currently has to acquire additional large aircraft.

Bristow stock (NYSE: BRS) closed at $36.33 on Monday, lower by 2.73% or $1.02 before the deal was announced.

Triumph also plans to price its $175 million of 20-year convertible senior subordinated notes on Wednesday. Price talk for its deal is at a coupon of 2.375% to 2.875% and an initial conversion premium of 30% to 35%.

There is a greenshoe option for a further $26.25 million.

Bank of America is the bookrunner of the Rule 144A offering.

Triumph, a Wayne, Pa.-based maker of aircraft components, will use the proceeds of the deal to prepay its existing Class A and B senior notes due 2012 and to repay part of a revolving credit line. Triumph said part of the reason for paying down that debt was to remove covenants in the senior notes in order to give the company more flexibility in making acquisitions.

Triumph stock (NYSE: TGI) closed at $44.19 on Monday, gaining 0.66% or 29 cents before the deal was announced.

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