McMoRan Exploration preferreds edge up on debut; Whiting preferreds on tap; Transocean active

By Rebecca Melvin

New York, June 17 -.McMoRan Exploration Co.'s newly priced 8% convertible preferred stock was slightly higher in light trading on its debut Wednesday.

The New Orleans-based oil and gas driller priced an upsized $75 million of perpetual convertible preferred stock after the market close Tuesday.

Also in the primary market, Whiting Petroleum Corp. was expected to price an offering of $300 million of perpetual convertible preferred stock after the close. A sellside analyst saw the paper 3% cheap at the midpoint of price talk. Final terms weren't available at press time.

Preferred issuance has been slow to come back since the primary market revived at the beginning of March, with the first preferred issuance emerging just this month.

Issuers are pricing preferreds "because they can" and "they are paying off debt and fixing balance sheets," a New York-based sellside trader said.

Elsewhere Transocean Inc. remained a volume leader, with the name accounting for 20% of total trading volume, according to a sellside trader around midsession.

There was a seller of the ProLogis 2.25% convertibles, an issue that was a big winner this year for convertibles players having moved from about 30 at the beginning of the year to about 81.

Fort Worth, Texas-based homebuilder D.R. Horton Inc.'s 2% convertibles looked to regain ground Wednesday, trading near 98, which is where it traded on Monday, before slipping to a 96 handle on Tuesday.

In the news, president Barack Obama unveiled sweeping new rules to regulate the financial system, giving new powers to the Federal Reserve to oversee the entire financial system and create a new consumer protection agency to guard against credit and other abuses.

Convertibles players queried had nothing good to say about the administration's program.

"More regs will drive hedge and other financial innovators away and further weaken our financial system," a West Coast-based convertibles player said.

Ratings target banks

Also on Wednesday, Standard & Poor's lowered its ratings and revised its outlook on 22 U.S. banks.

A New York-based sellsider said it was "kind of weird that [S&P] decided to do it after the banks raised capital."

The sellsider quipped that if one took any lessons from history, the S&P ratings move might just as well be a buy signal.

He referred to president Obama's comment during his outline of the regulatory overhaul that capital levels will be raised further making the banks less profitable.

Although there was no real volume in convertible bank preferreds, they were down a little bit, moving in line with their underlying shares, with the bank index down about 2%, he said.

"PNC was left alone, yet that stock is down...." he mused.

McMoRan edges up

The newly priced McMoRan 8% convertible preferreds opened at $100.75, and small prints went up in that context, according to a New York-based sellsider. Another sellsider said it went as high as 101.5 but was last at 100.5.

Shares of McMoRan dropped early but leveled off to trade down mostly by about 20 cents, or 3.5%, in the $5.56 to $5.60 range in heavy volume.

The convertible preferreds were increased from a planned $50 million and came near the cheap end of talk, which guided for a dividend of 7.5% to 8% and an initial conversion premium of 18% to 22%.

McMoran Exploration also priced 14.5 million shares at $5.75 per share, up from the planned 11 million shares.

The preferreds can be called starting June 15, 2014 subject to the company's stock trading above 130% of the conversion price for 20 out of 30 consecutive trading days.

J.P. Morgan Securities Inc. is the bookrunner for the offering. The registered offerings are being made under an existing shelf.

McMoRan Exploration is a New Orleans-based oil and gas driller with operations in the Gulf of Mexico and on shore along the Gulf Coast.

ProLogis slips from 81

ProLogis 2.25% convertible senior unsecured notes due 2037 traded as high as 81 on Wednesday but ended lower as at least one seller exited 100% of his position.

Trace indicated that the last sale on the ProLogis 2.25% convertibles was 78.875, which was down 2.75 points.

The paper had been bought at 30 and represented a big winner for the year to date for the West Coast-based buysider.

The buysider said he remained sanguine about the many opportunities that he continues to see in the convertibles space.

Shares of the Denver-based industrial REIT fell 74 cents, or 8%, to $8.04.

A New York-based sellsider said, "There has been a massive credit tightening across the entire REIT sector. They raised a ton of cash through equity sales and asset sales."

The sellsider said ProLogis was his biggest winner of the year.

Mentioned in this article:

D.R. Horton Inc. NYSE: DHI

McMoRan Exploration Co. NYSE: MMR

ProLogis LYSE: PLD

Transocean Inc. NYSE: RIG

Whiting Petroleum Corp. NYSE: WLL

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