UAL, Continental up on merger talk; Chiquita comes in big and rich; Bunge down on guidance

By Evan Weinberger

New York, Feb. 7 - UAL Corp. and Continental Airlines Inc. convertibles took off Thursday as speculation about mergers in the airline industry grew. Even AMR Corp., the parent company of American Airlines, was up, and they weren't mentioned in the merger talk.

Chiquita Brands International Inc. upsized its offering of convertible senior notes due 2016 and brought them to market beyond the rich end of talk. They closed slightly higher.

RadiSys Corp. priced its $50 million in convertible senior notes due 2013 at the rich end, but few, if any, saw it trade. The convertibles priced at par.

Bunge Ltd. convertibles were trampled on disappointing guidance for the coming year.

Mylan Inc. convertibles suffered a similar fate because the pharmaceutical company wouldn't provide guidance for its fourth-quarter and 2007 earnings later in the month.

SLM Corp., the parent company of student loan giant Sallie Mae, closed higher after it promised to cut expenses 20% over the next two years.

Trading on the major indices was bumpy Thursday as investors continued to pour through downbeat economic data.

The Dow Jones Industrial Average gained 46.90 points, or 0.38%, to close at 12,247.

The Nasdaq picked up 14.28 points, or 0.63%, for a 2,293.03 close.

And the Standard & Poor's 500 added 10.46 points, or 0.79, for a 1,336.91 close.

Convertibles trading Thursday maintained the pace from the previous day. "There are bids and offers, but I don't see much going on," a trader said.

Flaps down on airline convertibles

Reports of a merger between Delta Air Lines Inc. and Northwest Airlines Corp. led to speculation that Chicago-based UAL Corp., the parent company of United Airlines, and Houston-based Continental would form their own larger entity. In fact, the Chicago Tribune reported during the day that the two airlines would announce a deal as soon as Delta and Northwest did.

A deal between Delta and Northwest could be announced as early as next week, media reports said.

Convertibles and stock in UAL and Continental were up, but not nearly as much as one would expect.

"Continental's up a buck and change," a trader who said he didn't see much in airline activity said. "That's a logical instrument to be active since guys might be hurt on a takeover."

Continental's 5% convertible senior notes due June 15, 2023 closed Thursday at 166.45 versus a closing stock price of $30.45. They closed Wednesday at 160.102 versus a stock price of $28.78.

Continental stock (NYSE: CAL) gained $1.67, or 5.80%, on the day.

UAL's 4.5% convertible senior limited-subordination notes due June 30, 2021 closed Thursday at 136.175 versus a closing stock price of $39.55. They closed Wednesday at 131.89 versus a stock price of $37.67.

UAL stock (Nasdaq: UAUA) picked up $1.88, or 4.99%, Thursday.

AMR benefits from deal talk

Fort Worth, Texas-based AMR isn't talked about in the ongoing merger discussions. It's benefiting from excitement in the airlines sector, though.

AMR's 4.5% convertible senior notes due Feb. 15, 2024 closed Thursday at 115.52 versus a closing stock price of $16.18. They closed Wednesday at 112.71 versus a stock price of $15.25.

AMR's 4.25% convertible senior notes due 2023 closed Thursday at 107.676 versus a stock price of $16.18 after finishing Wednesday at 106.144 versus a stock price of $15.25.

AMR stock (NYSE: AMR) added 93 cents, or 6.10%, on Thursday.

Chiquita gets aggressive

Chiquita upsized its $175 million in convertible senior notes due Aug. 15, 2016 and came in way beyond talk Wednesday when the issue priced. The convertibles carry a 4.25% coupon and a 32.5% initial conversion premium.

The Securities and Exchange Commission-registered transaction had been talked with a 4.5% to 5% coupon and a 25% to 30% initial conversion premium. The deal was originally announced at $150 million.

There is an upsized $25 million over-allotment option. The greenshoe was originally announced at $22.5 million.

Traders reported seeing the issue trading just below par throughout the day. In the end, however, the convertibles ate their vitamins and closed the day at 100.18 versus a closing stock price of $16.64.

Chiquita stock (NYSE: CQB) lost 30 cents, or 1.77%, on Thursday.

Settlement for the convertibles is expected on Feb. 12.

Chiquita is a Cincinnati-based fruit and vegetable distributor. The company plans to use the proceeds to repay part of its term loan C.

In late January, Chiquita announced that it was considering a convertible issue as part of a refinancing plan.

RadiSys comes rich

RadiSys priced $50 million in 2.75% convertible senior notes due Feb. 15, 2013 with a 27% initial conversion premium Thursday after the market close.

The deal came in at the rich end of talk, which had been for a 2.75% to 3.25% coupon and a 23% to 27% initial conversion premium.

There is a $5 million greenshoe on the SEC-registered transaction.

Settlement is expected to be Feb. 12.

RadiSys is a Hillsboro, Ore.-based computer systems producer. The company plans to use the proceeds for general corporate purposes, which may include buying back a portion of its existing convertible senior notes due 2023. A portion of the proceeds will go toward the costs of a capped call transaction.

The deal priced at par, but there were no reports of trading in the issue.

RadiSys (Nasdaq: RSYS) gained 29 cents, or 2.83%, to close the day at $10.55.

Bunge down on guidance

White Plains, N.Y.-based food and agricultural products maker Bunge was trampled by investors Thursday after it gave poor guidance for the coming year.

The company announced that its fourth-quarter profits sank 12% from the same period in 2006 due to restructuring and other charges.

Bunge earned $1.82 per share, or $230 million, in the fourth quarter of 2007 after seeing a profit of $2.12 per share, or $260 million, in the fourth quarter of 2006.

The profits beat Wall Street estimates due to a surge in revenues.

But Bunge announced that its prospects for 2008 looked dimmer, which led to the crushing.

Bunge's 5.125% mandatory convertible preference shares due Dec. 1, 2010 closed Thursday at 1,065.23 versus a closing stock price of $112.66. They closed Wednesday at 1,148.22 versus a stock price of $123.58.

Bunge's 4.875% convertible perpetual preferred stock closed Thursday at 137.118 versus a stock price of $112.66 after closing Wednesday at 146.679 versus a stock price of $123.58.

Bunge (NYSE: BG) dropped $10.92, or 8.84%, on the day.

Mylan's not telling, investors run

Canonsburg, Pa.-based generic drug maker Mylan declined to give guidance for its fourth-quarter earnings. Mylan is expected to present its earnings Feb. 27.

That sent up a red flag for investors, who charged away from Mylan.

Mylan's 6.5% mandatory convertible preferred stock due 2010 closed Thursday at 955.97 versus a closing stock price of $13.09. The preferreds closed Wednesday at 993.511 versus a stock price of $13.81.

Mylan stock lost 72 cents, or 5.21%, on Thursday.

Sallie Mae up on cost cut promises

Reston, Va.-based student lender Sallie Mae rose after it announced a plan to lower its operating costs by 20% over the next two years.

The cost cutting started at the top, where CEO Albert Lord had his salary slashed from $3 million per year to $1.25 million per year.

Sallie Mae's 7.25% series C mandatory convertible preferred stock due 2010 closed Thursday at 1,087.5 versus a closing stock price of $21.61. The preferreds closed Wednesday at 1,060 versus a stock price of $20.39.

Sallie Mae (NYSE: SLM) rose $1.22, or 5.98%, on the day.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.