Northgate trades slightly above par; Newpark mostly steady after strong debut; Cogent up

By Rebecca Melvin

New York, Sept. 30 - Northgate Minerals Corp.'s new 3.5% convertibles were bid up in the pre-market Thursday to 102.5 to 103, after pricing late Wednesday. But the new paper came off in tandem with its underlying shares during the morning session, market players said. The issue, which was upsized, traded actively.

Newpark Resources Inc.'s new 4% convertibles slipped slightly early from Wednesday's strong debut, but the paper still traded better than 105.

The two new deals were among the most actively traded names in the convertible bond market on Thursday, along with stalwarts like Symantec Corp. and EMC Corp. For the day, Symantec and EMC were slightly lower outright, but in line with lower shares.

Overall, the market was "kind of quiet," according to one source, with focus taken up by month- and quarter-end marking of books.

For the day, the market was called mixed, according to a New York-based sellside trader. But for the month, the convertible market looked marginally "better to buy" as credit continued to tighten, a West Coast-based sellsider said.

In particular, yield names did better on the month. On Thursday for example Cogent Communications Group Inc. changed hands in round lots at 2 to 3 points higher than previous levels last month.

"Anything with any yield is up for the month; and vol. stuff is marginally better," the sellsider said.

In equities, September brought surges in the major averages all month as economic data came in "less bad" than in previous months.

The Dow Jones Industrial Average gained 7.7% for the month, ending at 10,788. The S&P 500 index was weaker on Thursday, but had been up 10% for the month; and the Nasdaq Stock Market topped them both, with a 13% push higher in the past month.

Gold names were in focus in September, including AngloGold Ashanti Ltd.'s new 6% mandatory due 2013, which was the largest new deal in the convertible bond market in September.

The new AngloGold paper was seen at 53.65 versus a share price of $46.50 on Thursday, according to a New York-based sellside desk analyst.

"AU was the biggest deal of the month and indicative of the positive sentiment toward gold and the mining companies generally," the analyst said.

New issuance tops August

Although it got off to a slow start, with the first new issuance in September in U.S. convertibles not pricing until Sept. 9, volume improved compared to August issuance, according to data compiled by Prospect News.

For September, there was $2.67 billion of new issuance in 11 deals, higher compared to $2.05 billion of issuance in August in four deals. But the level was down compared to the same period a year ago, when $3.14 billion of issuance in 12 deals priced in September 2009.

Three of the 11 deals were mandatory issues, which seemed a pretty big percentage, a New York-based sellside analyst noted. The mandatories included UBS' mandatories exchangeable into GT Solar, NextEra's 7% convertible equity units, and the AngloGold issue.

Also notable regarding the last month's new issuance is that many of the new issues, though smallish in size, moved up from par to the 105 to 106 level, along with better shares. Those that moved up included Level 3 Communication's 6.5% convertibles, Volcano's 2.875% convertibles and this week's Newpark Resources 4% convertibles.

Northgate slightly over par

Northgate's newly priced 3.5% convertibles were bid up to 102.5 to 103 versus a share price of $3.10 pre market but later were seen at 101 versus a share price of $3.00 and were last see at 100.125 versus a share price of $2.95. Syndicate sources couldn't be reached at the market close to verify where the new paper settled, but shares of the Vancouver, B.C.-based gold and copper producer bounced off their lows to end down 11 cents, or 3.5%, at $3.03.

Northgate was said to be the only thing of real interest in the market on Thursday, although at least some accounts flipped the paper back to the underwriter early on and remained uninvolved after that.

Northgate priced and upsized $150 million of six-year convertibles in the United States and Canada at par to yield 3.5% with an initial conversion premium of 30%. The deal was originally $135 million in size.

There is also an over-allotment option for an additional $20 million of notes, which was upsized from an originally talked $15 million.

The deal came at the midpoint of talk for the coupon, which was 3.25% to 3.75%, and at the rich end of 25% to 30% premium talk.

UBS Securities LLC was the bookrunner, with an underwriting syndicate that included Canaccord Genuity Corp, CIBC, Mackie Research Capital Corp., Cormark Securities Inc., Credit Suisse Securities (Canada) Inc., Macquarie Capital Markets Canada Ltd., Scotia Capital Inc. and TD Securities Inc.

The notes will be non-callable, with no puts.

Proceeds will be used to finance a portion of the development costs of its Young-Davidson gold mine near Matachewan, Ont.

The Young-Davidson mine is scheduled to begin producing gold in early 2012.

The deal modeled about 3.5% cheap at the midpoint of talk, using a credit spread of 650 basis points over Libor and a 30% initial conversion premium.

Newpark ends little changed

Newpark's newly priced 4% convertibles traded during the session at 105.32 versus a share price of $8.35, compared to 105.75 bid, 106.25 offered versus a share price of $8.40 on Wednesday.

Another source had the paper at 105.6 at the close versus a closing share price of $8.40.

Newpark Resources is a diversified oil and gas industry supplier, which provides drilling fluids, temporary worksites and access roads for oilfield and other commercial markets. The company is based in the Woodlands, Texas. Its shares ended down just 2 cents at $8.40.

Newpark priced $150 million of the seven-year convertible notes after the close of markets Tuesday to yield 4% with an initial conversion premium of 36%.

Cogent moves higher

Cogent Communications' 1% convertibles due 2027 were seen in trade on Thursday at 83, which was up from a previous level of 80 in August.

Shares of the Washington, D.C.-based internet access company ended the day up 23 cents, or 2.5%, at $9.47.

There was no particular news in the company, a sellside trader said. It was just the fact that it's a yield play and people are paying up for that now.

"Yield names have expanded. The bonds have moved up, and those with subpar premium hold some attraction," the sellsider said.

Mentioned in this article:

AngloGold Ashanti Ltd. NYSE: AU

Cogent Communications Group Inc. Nasdaq: CCOI

EMC Corp. NYSE: EMC

Newpark Resources Inc. NYSE: NR

Northgate Minerals Corp. Toronto: NGX

Symantec Corp. Nasdaq: SYMC

© 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.