Cash infusion report boosts WaMu, other financials, REITs mixed; Liberty/Time Warner edges higher

By Rebecca Melvin

New York, April 7 - Trading of Washington Mutual Inc. dominated the convertibles market on Monday, lifting other financial names, after a report that the Seattle-based thrift expects to secure a multibillion dollar cash infusion, market players said.

Washington Mutual's 7.75% convertible preferreds gained 3 points to 5 points on the day, according to several different sources. And it was pretty much the trade of the day, they said.

The move spurred trades of like complexion, including Bank of America Corp.'s 7.25% convertible preferreds and Citigroup Inc.'s 6.5% convertible preferreds. Also in play on Monday were the convertibles of regional bank National City Corp.

Real-estate investment trusts, including office REIT SL Green Realty Corp., National Retail Properties Inc. and Chicago-based mall operator General Growth Properties Inc. were mixed.

In the primary arena, no new U.S. issuance emerged on Monday. But Calgary, Alta.-based Harvest Energy Trust priced $250 million of seven-year convertible debentures, on a bought deal basis, to yield 7.5%, with an initial conversion premium of 15%.

Also, the $1.7 billion acquisition of LifeCell Corp. by Kinetic Concepts Inc.'s may yield a new deal in 2008 as the San Antonio, Tex.-based medical technology company said convertibles may feature in its permanent financing of the LifeCell deal, subject to market conditions.

WaMu leads financials higher

Washington Mutual has arranged a $5 billion cash infusion from private-equity group TPG and other investors, the Wall Street Journal reported Monday. The news fed optimism that the credit crisis is easing.

The thrift has been languishing since it came to light that it had considered selling itself to J.P. Morgan Chase & Co. before Countrywide Financial Corp. became J.P. Morgan's target.

Washington Mutual, which is the largest U.S. saving and loan, lost $1.87 billion in the 2007 fourth quarter and expects further loan-related losses this year.

In December, Washington Mutual priced $2.5 billion of the 7.75% convertible preferred stock - a substantial infusion of new capital - that together with cost cuts, changes in its home loans business and a planned dividend reduction were expected to fortify Washington Mutual's capital and liquidity position. Monday's news was eyed as further support of that position.

The 7.75% cumulative perpetual convertible preferreds, which have a par of $1,000, traded early Monday at $855, versus a stock price of $12.50, compared to $706.05, versus a closing stock price of $10.30 a week earlier.

"We traded a fair amount," a New York-based sellside desk analyst said.

Washington Mutual's older convertible paper, its 5.375% PIES due 2041, which aren't seen frequently in trade, traded at 33, compared to 30 previously, a Boston-based buysider said.

Shares of Washington Mutual (NYSE: WM) popped $2.98, or 29.3%, to $13.15.

Bank of America's 7.25% convertible preferred shares were said to be higher by 0.625 point to one point, according to a New York-based sellsider. They were seen closing at $1,079. 42, versus a share price of $39.50.

Shares of the Charlotte, N.C.-based bank (NYSE: BAC) ended just 9 cents higher, retracing most of its early gains - which was the case with the overall equity markets.

Citigroup's 6.5% convertible preferred shares, with a $50 par, were seen up 0.5 point, and closed at $51.59. Shares of the New York bank (NYSE: C) gained $0.52, or 2.2%, to $24.60.

National City's 4% convertibles dropped back to the 84.5 bid, 84.75 offered area after most trades went off at 86.5 early in the session, according to a Connecticut-based sellsider.

"It's quieted down," he said.

Shares of the Cleveland-based bank (NYSE NCC) closed up $0.25, or 2.8%, at $9.24.

REITs mixed in early trade

The convertibles of New York-based office/commercial REIT SL Green remained higher by as much as 0.5 point, while its shares pared some of the climb initiated Friday after an analyst lifted SL Green and another office REIT, Brookfield Properties, to "neutral" from "underperform."

The SL Green 3% exchangeable senior notes due March 30, 2027 trade at 83.5 versus a stock price of $88 early Monday; while the SL Green 4% convertibles due 2025 changed hands at 95, versus the same stock price.

By way of comparison, SL Green's 3% notes traded last Thursday before the upgrade at 83 versus a stock price of $86.75.

SL Green shares (NYSE: SLG) on Monday trimmed gains, but still closed up $1.02, or 1.2%, at $89.51.

SL Green's has two outstanding convertibles: the 3% exchangeable senior notes due March 30, 2027 and 4% senior unsecured convertible notes due June 15, 2025, which were acquired when SL Green merged with Reckson Associates Realty Corp. earlier this year.

Chicago-based mall operator General Growth Properties saw its 3.98% exchangeable senior notes due April 15, 2027 trade early Monday at 82.5 versus a stock price of $42.25. Two weeks ago the paper traded at 82 versus a stock price of $40.

General Growth shares (NYSE: GGP) slipped through most of the session Monday ending down nearly 1% at $41.87.

Meanwhile, National Retail Properties' 5.125% convertibles traded little changed at 103 versus a stock price of $23. The Orlando, Fla.-based retail REIT saw its common stock (NYSE: NNN) improve 0.52% or 12 cents to close at $23.18 on Monday.

Liberty/Time Warner edges up

The Liberty Media Corp./Time Warner Inc. 3.125% exchangeables traded as high as 102 before edging back to about 101.5, versus a stock price of $14.60, according to a New York-based sellside analyst.

Another source had the paper little changed at 101.7 for the close.

The issue has traded frequently since March 24 when the company offered an incentive to avert a put that was coming up. The incentive added a dividend pass through that effectively boosted the coupon to 4.5% or a little over.

The underlying shares of Time Warner, a New York-based media company (NYSE: TWX) added $0.09, or 0.6%, to $14.69 on Monday.

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