Bottomline adds, follows other new deals upward; Wesco sees sellers; AMR up on labor pact

By Rebecca Melvin

New York, Dec. 7 - Bottomline Technologies Inc.'s newly priced 1.5% convertibles gained outright and by 2.5 points on a dollar-neutral, or hedged, basis on Friday despite lower shares, market sources said.

The gain came after the Portsmouth, N.H.-based business-to-business software company priced an upsized $165 million of the convertibles at the midpoint of coupon talk and at the cheap end of premium talk and was in line with the positive debuts of this week's other new deals from Seacor Holdings Inc. and Volcano Corp.

The positive receptions given the new deals were chalked up to a market starved for new issuance, market players said.

The convertibles of bankrupt AMR Corp. extended recent gains Friday, trading up about 2 points to 79, a Connecticut-based trader said, citing news that the pilots union ratified a new labor pact, ending a years' long dispute with the parent of American Airlines. But the union said the approval should not be viewed as support for a stand-alone American Airlines or the current management team.

Also in the distressed arena, Suntech Power Holdings Co. Ltd. finally traded after a hiatus at 30, which was well off previous levels near 39.

The trade was motivated possibly by news out of JinoSolar Holding Co. Ltd. that it will get up to $1 billion over five years from China Development Bank to fund solar projects outside China.

"That seemed to spur some activity in the solar sector," a trader said of Suntech Power.

Elsewhere, the market was fairly quiet Friday, marking an end note to an entire week that was quiet, traders said.

"The whole week was pretty slow. There was no real news driving buying or selling," a New York-based trader said. "But we did see some high dollar, in-the-money, put names better for sale."

The trader noted Wesco International Inc. saw sellers of its 6% convertibles due 2029, although the notes are still well above double par.

Wesco was downgraded to "outperform" from "market perform" earlier in the week by FBR Capital Markets & Co., which cited ongoing sluggishness in the company's industrial, datacom, and non-residential markets, which account for about 70% of revenues, and could result in organic growth remain in the low-single-digit range near term.

Overall, however, the market was focused on the new deals, such as Bottomline, and there wasn't a lot of secondary market activity, sources said.

Bottomline adds on debut

Bottomline's newly priced 1.5% convertible due 2017 traded at 102.875 bid, 103.25 offered versus an underlying share price of $23.12.

Shares of the Portsmouth, N.H.-based company fell 45 cents, or 1.9%, to $23.10 in very active trade.

Shares were weaker toward the end of the session, but the convertible bonds were firm at the 102.875 to 103.25 level, a syndicate source said.

He called the bonds better by 2.5 points on a dollar-neutral basis.

Bottomline priced an upsized $165 million of five-year convertible senior notes at par after the market close Thursday to yield 1.5%, with an initial conversion premium of 27.5%.

Pricing came at the midpoint of 1.25% to 1.75% coupon talk and at the cheap end of 27.5% to 32.5% premium talk.

RBC Capital Markets LLC and RBS Securities Inc. were joint bookrunners of the planned $150 million offering of five-year convertible bonds.

The registered deal has a greenshoe for up to an additional $24.75 million of notes.

The business-to-business software solutions company seeks to automate billing and invoicing functions for companies.

The underwriter went out with a credit spread of 550 basis points over Libor and a 33% vol.

Bottomline also entered into convertible bond hedge and warrant transactions, which had the effect of boosting the premium from the issuer's perspective to 70%.

Proceeds will also be used for general corporate purposes, including potential acquisitions and working capital.

AMR extends recent gains

AMR's 6.25% convertibles gained about 2 points in trade Friday to 79, a Connecticut-based trader said, citing positive headlines that the pilots union has ratified a new contract, ending a longstanding labor dispute with the parent of American Airlines.

The contract was approved by nearly 75% of the pilots who voted and gives the Allied Pilots' Association a 13.5% equity stake in AMR and offers what the union sees as a path to "industry standard" pay.

AMR filed for bankruptcy in November of last year, citing primarily high labor costs. It has said it needs to cut those costs by $1 billion a year. Until now, it had achieved concessions from its ground workers and flight attendants but not the pilots.

Friday's vote was seen as clearing the way toward exiting Chapter 11 bankruptcy protection. But the pilots union said the ratified agreement should not be viewed as union backing for a stand-alone American Airlines plan or its current management team.

Last week, the bonds gained on news that a group holding about $885 million of the bankrupt airline's debt - a group that includes JPMorgan Chase & Co. and Pentwater Capital Management LP - said it will provide restructuring financing for the Fort Worth-based parent of American Airlines, which would allow the company to emerge as a standalone business. But the group has one demand: fire the entire current board of directors.

Wesco sees sellers

Wesco's 6% convertible debentures due 2029 were seen last at 233.75 Friday, which was up on the day but lower for the week.

Wesco shares were up on Friday by $1.50, or 2.4%, to $64.45.

On Wednesday, FBR Capital Markets downgraded the shares and reduced its price target to $66.00. FBR said decelerating earnings momentum and a lack of catalysts could result in shares trading range-bound and it suggested investors move to the sidelines for now.

"Our channel checks suggest end market sluggishness could continue near term," with the fourth quarter likely to be another anemic period.

"Our recent checks with electrical equipment distributors suggest sales trends for October and November have come in weaker than the already downbeat plans. This weak quarter-to-date performance has resulted in a number of these smaller distributors revising fourth-quarter expectations lower," the FBR note stated.

Despite Wesco's outlook calling for modest flat to up 1% organic revenue growth, FBR suggested risks to the downside.

Meanwhile, Hurricane Sandy was said to have helped utility sales for the Pittsburgh-based supplier of electrical and industrial supplies, but this will likely be offset by weaker industrial markets and branch sales disruption.

Mentioned in this article:

AMR Corp. Pink sheets: AAMRQ

Bottomline Technologies Inc. Nasdaq: EPAY

McMoRan Exploration Co. NYSE: MMR

Seacor Holdings Inc. NYSE: CKH

Suntech Power Holdings Co. Ltd. NYSE: STP

Volcano Corp. Nasdaq: VOLC

Wesco International Inc. NYSE: WCC

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