Clearwire up on Sprint funding, coupon payment; Central European gains; Old Republic mixed

By Rebecca Melvin

New York, Dec. 1 - Clearwire Corp.'s 8.25% convertibles jumped 13 or 14 points on Thursday in active trade after word that the Kirkland, Wash.-based wireless network provider struck an agreement for new funding from Sprint Nextel Corp., allowing the cash-strapped company to make its Dec. 1 coupon payments, which had been in doubt.

Another volatile name in the convertible space, Central European Distribution Corp., saw its paper climb in a continuation of a move sparked earlier this week after Russian Standard agreed to take a stake in the ailing Polish vodka maker.

AMR Corp. saw its distressed convertibles move up another point or so to trade at 21, which was up from 19 bid, 20 offered on Wednesday. The convertibles collapsed on Tuesday after the Fort Worth, Texas-based parent of American Airlines declared bankruptcy.

Over the last couple of days, Sotheby's convertibles moved up about 7 points outright to 119 from 112. But the move was mostly in line with the underlying shares, which had been pulled higher by the mammoth rally in stock markets.

"It's within 0.125 point of where it was on a dollar-neutral basis," a trader in the name said. It was 0.125 point better or worse depending on the hedge: a heavy hedge made it weaker.

Meanwhile, Old Republic International Corp. stands mixed, with the older, shorter-dated issue trading a little stronger, and the newer, longer-dated issue lower on a dollar-neutral basis over the past few days.

One trader said there didn't appear to be any pattern to convertibles trading as the equity markets turned flattish after their three-day run.

"Techs are outperforming and financials are underperforming; it's a pretty dull day," a convertibles trader said.

The primary market remained pretty quiet, although A. M. Castle & Co. announced plans to sell $50 million of five-year convertible senior notes in a private transaction concurrently with a larger, straight note offering and new revolving credit financing.

The small, private deal wasn't likely to be heard in the Street's gray market, one trader said.

Jefferies & Co. Inc. is running the books on the Rule 144A deals, which will be priced soon. There was no price talk yet for the convertibles, a syndicate source said.

The Oak Brook, Ill.-based maker and distributor specialty metals and industrial plastics also plans to sell $225 million of five-year senior secured notes and enter into a new $100 million asset-based revolving credit facility.

The lack of new issuance has turned convertibles into a pretty sluggish marketplace.

"I kind of think that people are waiting for new paper to spur them to move their portfolios," one sellsider said. And with stock prices back up, he was hopeful that there would be some more new deals in the next few weeks.

A second source said that with the high coupons in high-yield pricing recently, he was hopeful that the "dam was breaking."

Clearwire powers up

Clearwire's 8.25% convertibles due 2040 powered up 13 or 14 points on Thursday to the 52.5 bid, 53.5 offered mark, up from about 40 on Wednesday and from the 30s on Tuesday.

A second trader said the move was from the 33 range to the 53 range, a 20-point trade up.

Shares of the Kirkland, Wash.-based wireless services company ended higher by 25 cents, or 14%, to $2.03. Early in the session, those shares had popped by as much as 37%.

Clearwire "made an interest payment on a bunch of different notes that people were skeptical that they could make," a trader said. "That was the one name that stands out for today."

The pop was attributable to word that Sprint, Clearwire's largest customer and shareholder, has agreed to a network pact and a potential equity infusion that garners about $1.6 billion for the financially ailing Clearwire.

Sprint agreed to pay more than a billion dollars for using the Clearwire network and committed to a Clearwire equity offering of up to $347 million.

Unlimited use of Clearwire's current wireless network will cost Sprint $926 million in 2012 and 2013. In return, Clearwire committed to keep that network, which is based on the older WiMax technology, up and running until at least 2015.

Sprint will also pay Clearwire up to $350 million in a series of prepayments over two years at most for capacity on a high-speed LTE service Clearwire hopes to build if it achieves certain network targets by June 2013.

With this agreement in hand, Clearwire went ahead and made a $237 million debt interest payment. Clearwire had told the Wall Street Journal last month that it might skip the payment to conserve cash.

Central European moves up

Central European's 3% convertibles due 2013 traded up another few points on Thursday to 60, a move which extend gains from Tuesday and Wednesday.

Shares of the Polish vodka maker moved up 16 cents, or 3.5%, to $4.75.

The move on Thursday was from about 56 to 60, a New York-based trader said, and that move represented "a continuation of a move from 50 to 56 earlier after one of the Russian banks took a 10% stake in the equity."

Last month, Central European Distribution slid hard after the beverage maker and distributor reported earnings that missed estimates and lowered its outlook for the second time this year.

Old Republic mixed

Old Republic's 8% convertible, which matures in some six months on May 15, 2012, traded at 99.5 on Thursday, which was "a little stronger than they were last week," according to a New York-based trader.

The Old Republic 3.75% convertibles due 2017 have come in, or contracted, on a dollar-neutral basis over the past week, although they moved in line on Wednesday, the trader said.

Shares of Old Republic added 2 cents, or 0.3%, to $8.07 on Thursday.

The 3.75% paper was active between 81.5 bid, 82 offered, with the stock price around $7.47 on Tuesday. On Nov. 22, the Old Republic 3.75% convertibles traded at 83.25 bid, 84 offered with the stock around $7.40.

The Old Republic 8% convertibles are short dated and never should have gone as low as they were, the trader said.

Meanwhile the longer dated 3.75% issue, with its six-year duration difference, is more difficult to value, the trader said.

Mentioned in this article:

A.M. Castle & Co. NYSE: CAS

AMR Corp. NYSE: AMR

Central European Distribution Corp. Nasdaq: CEDC

Clearwire Corp. Nasdaq: CLWR

Old Republic International Corp. NYSE: ORI

Sotheby's NYSE: BID

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