U.S. Bancorp brings $2 billion; Kansas City Southern, St. Jude, Omnicare also launch; Calpine down

By Rebecca Melvin

Princeton, N.J., Dec. 5 - With the exception of a handful of names like Calpine Corp., the convertible secondary market remained quiet on Monday, which has been a typical intra-holiday mode of late. But the primary market heated up, with four new deals, including two overnight deals, launched after the end of the session.

Meanwhile, no new information emerged on Entergy Corp.'s $500 mandatory convertibles that are now on the horizon. Entergy's S-1 filing is subject to review by the Securities and Exchange Commission, so timing on the deal could range anywhere from the end of December to January or February, a syndicate source said.

The new "well-known seasoned issuer" (WKSI) rules that don't require filings to be subject to review, and thereby offer companies more flexibility in terms of timing the market, apply only to S-3 filings. Entergy had to file under S-1 because its New Orleans-based electric utility subsidiary filed for bankruptcy in the aftermath of Hurricane Katrina, according to the source.

In the secondary market, Calpine convertibles bumped around in active trade and ended a couple of points lower amid another dose of bad news, namely that the Calpine shares will be delisted from the New York Stock Exchange beginning Tuesday.

The delisting was expected, and wasn't a factor in trade on Monday, however, traders said.

Monday's news "had nothing to do with convertibles trading," a Connecticut-based sellside convertibles trader said, who added that the convertibles are trading outright and will continue to trade actively in anticipation of a potential Chapter 11 bankruptcy protection filing.

Other names mentioned in trade were the convertible bonds and preferreds of Chesapeake Energy Corp., which were better bid amid higher energy prices in the face of winter weather hitting parts of the U.S., one trader said.

Also Alloy Inc. bonds gained as their shares jumped 6.2%.

"It was a quiet day," a New York-based sellside trader said shortly ahead of 4 p.m. But that changed after the close, when two overnight deals hit the tape, including U.S. Bancorp's $2 billion of 30-year floating-rate convertible senior debentures, for which terms were set, but a reoffer price was still being determined.

The other overnight deal was Kansas City Southern's $210 million of convertible perpetual preferreds, which were talked to yield 5.25% to 5.75%, with an initial conversion premium of 21.5%, according to a syndicate source.

Meanwhile St. Jude Medical Inc. launched $600 million of 30-year convertibles that were expected to price Tuesday after the close. And Omnicare Inc. launched $750 million of 30-year convertibles that were expected to price next week, on Dec. 12, after the close of markets, according to a syndicate source.

U.S. Bancorp's $2 billion to be reoffered.

A reoffered price on U.S. Bancorp's $2 billion of convertible senior debentures was yet to be determined late Monday, according to a syndicate source. But at least one sellside firm put the deal at 99.

The Rule 144A deal included a floating rate equal to 3-month Libor minus 146 basis points, with an initial conversion premium of 20%, the source said.

Citigroup and Deutsche Bank were joint bookrunners for the debentures, which will have a 13-day option to purchase an additional $500 million.

The debentures are non-callable for one year and have puts in year one, starting on Dec. 11, 2006, followed by March 11, 2007, June 11, 2007 and Sept. 11, 2007 and Dec. 11, 2007, 2010, 2015, 2020, 2025 and 2030.

Minneapolis-based U.S. Bancorp is the sixth largest U.S. financial holding company.

Kansas Southern to price early Tuesday

Kansas Southern, another "grand old company," as one one buysider called both it and U.S. Bancorp, said it was bringing a registered deal of about $210 million of preferreds.

The preferreds were talked to yield 5.25% to 5.75%, with an initial conversion premium of 21.5%, sources said.

The perpetual shares were being sold via bookrunner Morgan Stanley, according to sources. But the firm didn't respond to inquiries about the launch.

According to sources, the $1,000 liquidation preference preferreds are non-callable for five years with an issuer option to force conversion at 130% of the conversion price after five years. They also have dividend protection.

Most of the proceeds will be used to purchase nine million shares of Kansas City Southern common stock from Grupo TMM, SA, a company press release stated.

Concurrent with the preferred offering, TMM is offering nine million shares of common stock in a separate offering.

Headquartered in Kansas City, Mo., Kansas City Southern is a transportation holding company that has railroad investments in the United States, Mexico and Panama. Its primary U.S. holdings include The Kansas City Southern Railway Co. and Texas Mexican Railway Co.

St. Jude Medical brings $600 million deal

St. Jude Medical was expected to price $600 million of 30-year convertibles on Tuesday, after the close. Price talk on the senior debentures was for a coupon of 2.375% to 2.875%, with in initial conversion premium of 25%, according to syndicate sources.

The deal, being sold via bookrunner Banc of America Securities, includes an option to purchase an additional $60 million of debentures.

St. Paul, Minn.-based St. Jude Medical is a medical device maker.

Omnicare brings $750 million deal

Omnicare was expected to price $750 million of 30-year convertibles on Dec. 12 after the close of markets. Price talk on the notes was for a coupon of 3.125% to 3.625%, with an initial conversion premium of 32.5% to 37.5%. JP Morgan, Lehman Brothers and CIBC World Markets are acting as joint bookrunners and SunTrust Robinson Humphrey, Wachovia Securities and Merrill Lynch are acting as co-managers for the offering.

Concurrent with the convertibles offering, the company is offering $750 million of senior subordinated notes and 12,825,000 shares of common stock, not including the underwriters' option to purchase additional shares. The three offerings are conditioned on each other.

Part of the proceeds from the convertibles will be used to repay the company's $1.9 billion 364-day loan facility. Remaining net proceeds will be used to repurchase all of the outstanding $375 million principal amount of its 8.125% senior subordinated notes due 2011.

Covington, Kentucky-based Omnicare is a nursing home drug-services provider.

Calpine down 2 points

Calpine's 6% and 4.75% convertibles traded actively after the NYSE advised the company that it expects to suspend trading in its shares prior to the opening of the market on Tuesday due mostly to its abnormally low selling price and also due to the company's current financial condition. Calpine expects its common stock will be quoted on the OTC Bulletin Board.

Calpine's 6% traded intraday at 14 and 14.50, but closed out the session higher at 15 bid, 15.50 offered. Calpine's 4.75% convertibles closed at 21 bid, 22 offered. Calpine shares ended their last session on the Big Board down four cents, or 14.3%, at $0.24.

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