A dozen new deals this week put $4.64 billion into market; all of Friday's deals higher

By Ronda Fears

Nashville, Dec. 12 - After a whirlwind week of new issues - 12 in all totaling $4.64 billion - convertible traders said the market died out around noon Friday. But the new paper put into circulation Friday and for the week was higher for the most part, and that was encouraging, they said.

"There were a couple of deals that struggled for a while, those that were reoffered below par, but they seem to have stabilized; I don't think they are trading much yet, but they've maybe been marked down to where someone might find some interest," said a convertible dealer.

There were at least two bought deals during the week that were reoffered below par by the underwriter.

But for the most part, market sources said the week's deals were positive. The week built off the momentum that began the first week of December when six deals brought to market fetched $1.385 billion.

The coming week is expected to mirror that level of activity, capital markets sources said. Already, though, the month of December has produced $6.035 billion of issuance.

"Everything really that's going to get done this year just about has to get done next week," said one banker.

"There could be a deal or two the week of Christmas, but that's pushing it because a lot of people will be off for the holidays already. And the week between Christmas and New Years doesn't even exist."

The three floaters injected into the market this week were a rave, according to buyside sources, because of their defensive structures.

Apogent Technologies Inc. sold $300 million of 30-year convertible floating-rate notes, on swap, to yield the three-month Libor minus 125 basis points with a 42% initial conversion premium - right at the middle of guidance of three-month Libor minus 100 to 150 bps, up 40% to 44%.

Lehman Brothers, one of the bookrunners on the Apogent deal, closed it at 100.25 bid, 100.75 offered. The underlying stock lost ground on the heels of the overnighter, closing off 65 cents, or 2.79%, to $22.65. Apogent's old 2.25% convertible due 2021 was quoted off 0.375 point to 100.75 bid, 101.25 offered.

Magnum Hunter Resources Inc. sold $100 million of 20-year convertible floating-rate notes to yield the three-month Libor flat with a 45% initial conversion premium - at the cheap end of price talk of three-month Libor flat to minus 25 basis points, up 45% to 50%.

It also met with success, climbing 3.5 points out of the gate. Deutsche Bank Securities, one of the bookrunners on the deal, closed it at 103.5 bid, 103.75 offered. The stock added back 37 cents, or 4.4%, to $8.78.

Sellside analysts pegged the Magnum Hunter deal around 2.05% cheap, at the midpoint of guidance.

From earlier in the week, Wyeth's jumbo $850 million floater, which yields the six-month Libor minus 50 basis points with a 0% floor, added .0375 point to 102.25 bid, 102.5 offered, while the stock regained 64 cents, or 1.64%, to $39.65.

CenterPoint Energy Inc. and Scottish Re Group Ltd. also put new paper into circulation Friday, and Scottish Re upsized its deal "to meet overwhelming demand," as the company put it in a statement. The Bermuda-based insurance firm bumped its deal to $125 million from $115 million.

Scottish Re sold the three-year non-callable mandatory convertibles at par of 25 to yield 5.875% with a 22% initial conversion premium - at the aggressive end of price talk of 5.875% to 6.375%, up 18% to 22%.

Bear Stearns & Co. Inc., sole bookrunner on the deal, closed it at 25.85. The stock gained 30 cents, or 1.55%, to $19.62.

Sellside analysts put the Scottish Re convertible 4.8% cheap at the middle of price talk.

CenterPoint's $225 million of 20-year convertible notes were issued at par to yield 2.875% with a 40% initial conversion premium - at the tight end of yield talk of 2.75% to 3.25% and at the middle of premium guidance.

At the middle of price talk, sellside analysts had put the new CenterPoint convertible 0.83% cheap.

CenterPoint's other convertible, the 3.75% due 2023 that was issued in May, was quoted up 1 point on Friday to 105 bid, 105.25 offered.

Deals from earlier in the week were mostly higher, although traders said there was not as much activity in those issues on Friday. Activity in general faded sharply Friday afternoon, traders said.

"Everybody has holiday parties to go to now, that's on The Street and all the clients, too, so Fridays are even slower that usual," one dealer said.

Hanover Compressor Co. and Serena Software Inc. had two of the most popular deals from earlier in the week.

Hanover's new 4.75% due 2014 gained 1 point on Friday to 106.625 bid, 106.875 offered, with the stock up 19 cents, or 1.85%, to close at $10.45. Hanover's old 4.75% due 2008 was flat at 89.625 bid, 90.625 offered.

Serena's 1.5% due 2023 rose another 1.5 points to 104.625 bid, 105.125 offered, while the stock gained 55 cents, or 3.22%, to $17.65.

"These were the cheapest of the deals this week, so they were very popular," one buyside trader said. "Others were popular for different reasons, [such as] defensive structures, or in a space like drugs or biotech where there is a great deal of interest."

For next week, the only firm deals on the calendar are Interpublic Group of Cos. Inc.'s $325 million mandatory convertible and Roper Industries Inc.'s $150 million in proceeds of discount cash-to-zero convertible notes.

Interpublic is peddling three-year non-callable mandatory convertibles talked to yield 5.5% to 6.0% with an 18% to 22% initial conversion premium. Citigroup Capital Markets, JPMorgan Securities and UBS Investment Bank are joint bookrunners of the deal, which is scheduled to price after the close Tuesday.

Roper's 30-year notes are talked to yield 4.0% to 4.5% with a 27.5% to 32.5% initial conversion premium. Pricing is expected sometime during the week. Sole bookrunner of the deal is Merrill Lynch & Co.

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