Allied Waste hauled to 102.25; Cendant bid up as stock drops; Yahoo! cheers quiet in converts

By Ronda Fears

Nashville, April 8 - The new Allied Waste Industries Inc. convertible was fairly active in the immediate aftermarket, climbing about 2.25 points from par, but like the rest of the market, action trailed off sharply in the afternoon.

"It was a reasonably busy day" for the tail end of a holiday week, said a convertible dealer at one of the top convertible shops.

"It got very quiet after the government market closed at 1 o'clock and the futures closed."

Bonds closed early in advance of Good Friday, when all the markets will be shut down for a three-day weekend.

Treasuries were relatively quiet, though, and convertible players collectively sighed in relief as a result. The major stock indexes were rather flat, too, but there were some individual moves that were eye-popping.

Yahoo! Inc., for example, shot up more than 16% in the stock market. The online service provider's convertibles also rose sharply, but traders remarked that there was not a great deal of activity in the bonds.

Reliant Resources Inc. also saw little reaction to news of criminal indictments handed down in San Francisco against its unit Reliant Energy Services Inc. and four employees - two current and two former - alleging price manipulation in the California power crisis in 2000. Traders said the event was priced into the bonds about a month ago.

A trader noted, too, that Cendant Corp.'s convertible bond, the 3.375% issue, had a strong bid at 111.25, which he said would be better by about 0.25 point, while the stock closed off 12 cents, or 0.48%, to $24.73.

Looking to the coming week, market participants are expecting a busy new issue slate after a fairly busy week despite the holidays.

Allied Waste prices tight

To no one's surprise, Allied Waste printed the $200 million of 30-year convertible notes at 4.25% with a 57% initial conversion premium - at the aggressive end of revised price talk for a 4.25% to 4.75% coupon and 53% to 57% initial conversion premium, which had been tightened from original guidance of 4.5% to 5.0%, up 53% to 57%.

The new Allied Waste convertible traded rather briskly early in the day, a dealer said, but dropped off sharply in the afternoon.

Sellside analysts had put the deal right at about fair value to slightly rich at the midpoint of revised price talk, but the issue's popularity drove it higher in the aftermarket.

It ended up about 2.25 points from par, or about 1.25 points from gray market levels before it priced, to a bid of 102.25 with an offer at 102.5.

Allied Waste shares closed up a dime, or 0.77%, to $13.11

The Scottsdale, Ariz.-based trash hauler's unit, Allied Waste North America Inc., also sold an upsized $275 million of 6.375% seven-year senior notes and $400 million of 10-year 7.375% senior unsecured notes.

Western Wireless eyes markets

News that Western Wireless Corp. was considering options to refinance its senior secured credit facility sent its convertibles up sharply, as some speculated that it might consider another offering.

"Convertible financing is very attractive, especially for a company like Western Wireless," said a buyside convertible trader.

In a succinct press statement, Western Wireless said that "in light of current market conditions, which the company believes to be attractive, it is reviewing its options to refinance its existing senior secured credit facility."

Western Wireless shares gained $1.03 on the day, or 4.52%, to close at $23.80.

The Bellevue, Wash.-based rural wireless carrier's 4.625% convertible shot up 6.5 points to 180 bid, 181 offered.

The bonds, which still have more than 2 years of call protection, had been sliding with the broader market, and particularly the rural wireless group, since around mid-February, the buyside trader noted. Around two months ago, he said, the Western Wireless convertible was trading at around 193; the stock then was at about $26.

Rural wireless carriers had been pummeled, a dealer said, because they are seen possibly being erased by the global expanse of the big cell phone companies in the wake of the Cingular merger with AT&T Wireless.

Yahoo! converts rise 15 points

Shares of Yahoo! Inc. on Thursday shot up to a three-year high after the online bellwether reported that first-quarter profits doubled, and the company plans a 2-for-1 stock split. Other online companies like search engine Ask Jeeves Inc., which has a convertible outstanding, joined the party.

While the convertibles of Yahoo climbed in tandem with the stock, traders said there was far less volume in the bonds than the stock.

The Yahoo 0% due 2008 traded at 149 early in the day, a dealer said, and the issue closed at about 150.25 bid, 150.75 offered. The bonds were better by more than 15 points on an 80 delta.

Yahoo shares ended Thursday up $7.86, or 16.26%, to $56.21.

Late Wednesday, Yahoo reported first quarter results and boosted its revenue forecast for second quarter and 2004 and said it planned a 2-for-1 stock split payable May 11 to stockholders of record on April 26.

First quarter profits came to $101 million, or 14 cents per diluted share, versus $47 million, or 8 cents per diluted share, in first quarter 2003. Revenue, excluding shared advertising revenues, grew to $550 million from $283 million.

For second quarter, which is under way, Yahoo forecast revenue, excluding shared advertising revenues, of $580 million to $615 million. For all of 2004, the company expects revenue, excluding shared advertising revenues, of $2.4 billion to $2.5 billion.

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