Convertibles mixed; Micron, ON Semiconductor rise; Thornburg surges; Suntech powers up

By Rebecca Melvin

New York, March 12 - The convertible bond market was split Wednesday between names of larger size and better quality that were firmer, and less liquid, lower quality issues, which were seen weaker, market participants said.

Micron Technology Inc. and ON Semiconductor Corp. were winners on Wednesday, while Medtronic Inc., Symantec Corp. and EMC Corp. were steady in active trade.

In financials, the convertible preferred shares of Thornburg Mortgage Inc. surged more than 50%.

Meanwhile, the convertible bonds of General Motors Corp. were down between 0.5% and 3%, compared to a 3.9% drop in their underlying shares.

"It seemed as though there was lift to certain names such as those that are slightly below investment grade, large size, and non financial," a West Coast-based convertibles trader said.

"People were buying," he said, mentioning names like Medtronic and Symantec. "Guys are getting involved in names that can trade - liquid names and better credits."

In the primary arena, the new 3% convertibles of Suntech Power Holdings Co. Ltd. made an excellent debut, trading up through the session to a close of 105 bid, 105.5 offered, according to a syndicate source.

But borrow was a problem for another deal, the Coeur d'Alene Mines Corp. convertibles, that was expected to price late Wednesday. The silver mining company plans to price $150 million of 20-year convertibles.

Sun shines on Suntech

The new Suntech 3% convertibles due 2013 were well-liked on Wednesday, sources said. They traded up in the first half of the session to the 104 level - along with higher underlying shares; and, by the end of the day, they were at 105 to 105.5 versus a closing stock price (NYSE: STP) of $32.67, which was up 8% on the day.

The Wuxi, China-based maker of solar cells priced late Tuesday an upsized $500 million of five-year convertibles to yield 3% with an initial conversion premium of 36%. The deal was originally expected to be for $425 million.

The Rule 144A deal priced on the cheap end of talk for the coupon, which was talked between 2.5% to 3%, and at the rich end of talk for the initial conversion premium, which was seen between 31% and 36%.

Goldman Sachs (Asia), USB Investment Bank and ABN Amro Rothschild were bookrunners, with Goldman as left lead bookrunner and global coordinator of the offering. UBS was stabilization agent.

The notes, which have a greenshoe of $75 million, are non-callable, and there are no puts.

Suntech expects to use most of the proceeds for procuring upstream supplies, while the rest is earmarked for production capacity expansion and new technology commercialization.

Suntech's existing 0.25% convertible bounced back some on Wednesday, with a trade at 98 in the first half of the session and a close at about 97.8 versus a stock price of $32.25. That compared to a close of 95.8 on Tuesday.

Perhaps players were reassured about the issue from a credit standpoint due to the large size of the new issue and the fact that the 0.25s are putable in two years, a New York-based desk analyst said.

New Coeur d'Alene issue emerges

One player said his shop wouldn't be involved in the Coeur d'Alene deal because of a lack of stock borrow. The mining company's bonds were talked to yield 3% to 3.5% with an initial conversion premium of 25% to 30%, according to market sources.

But an analyst said they looked about 3% cheap using inputs that reflected high business risk.

The senior unsecured notes are being sold under a shelf registration statement filed Dec. 27. They are non-callable for seven years, with puts in years five, seven, 10 and 15. The bonds have full dividend and cash make-whole takeover protection.

Deutsche Bank Securities Inc. is bookrunner for the deal, and J.P. Morgan Securities Inc. is co-manager.

There is an over-allotment option for up to an additional $22.5 million of notes.

Standard & Poor's assigned a B- debt rating to the proposed issue, reflecting risk that exists for a capital-intensive commodity-based company with a modest scope of operations, limited reserve base and political and operating risk at some of its operations, the agency said.

The rating also incorporates the company's aggressive expansion plans and uncertainties about successfully developing its planned lower-cost mining operations, S&P said. Meaningful challenges include volatile prices, governmental regulation, environmental issues and adverse geological conditions.

Coeur d'Alene plans to use proceeds to complete construction of the San Bartolome silver project in Bolivia and to construct the Palmarejo silver and gold project in Mexico.

Any remaining proceeds may be used to repay borrowings under the company's bridge loan facility and bank facility and for general corporate purposes.

Coeur d'Alene is an Idaho-based silver and gold producer, with mining interests in Alaska, Nevada, Argentina, Australia, Bolivia, Chile and Tanzania.

Coeur d'Alene's existing 1.25% convertible senior unsecured notes closed Wednesday at 88.689, versus a share price of $4.37. That compared to a price of 93.9 versus a share price of $4.89 on Tuesday. Shares of Coeur d'Alene (NYSE: CDE) fell 10.6%.

General Motors dips

Meanwhile, the convertibles of Detroit-based General Motors were all lower on the day in fairly active trade.

GM's 4.5% series A convertible notes due March 11, 2032 (NYSE: GXM) lost 20 cents, or 1.1%, to close at $17.94.

GM's 6.25% convertible senior debentures due July 15, 2033 (NYSE: GPM) lost 55 cents, or 3.08%, for a $17.30 close. And GM's 1.5% convertible senior debentures due May 31, 2009 (NYSE: GRM) closed at $22.98, a loss of 11 cents, or 0.50%, on Wednesday.

By way of comparison, the 4.5% bonds were $18.34 versus a stock price of $26.5 on Feb. 19, while the 6.25% bonds were $20.5 versus the same stock price; and the 1.5% issue was $24.5.

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