Newell, Autoliv add on debuts; Huntington gains on exchange, then pulls back; Amkor to price

By Rebecca Melvin

New York, March 25 - The upsized $300 million of new convertible senior notes from Newell Rubbermaid Inc. traded up out of the gate to 111 Wednesday as investors responded favorably to an attractive convertible structure and company, which is a household name with a cheap valuation.

Later the new paper pared its gains and was quieter, as equity markets sagged into negative territory and then rallied. A syndicate source closed the new notes at 108.

Autoliv Inc. also priced a deal - this one $150 million of $25 par equity units - that traded around its par price most of the day, closing a little higher at 25.1 bid, 25.5 offered, a syndicate source said.

After the close of markets, Amkor Technology Inc. said it planned to price $240 million of five-year convertibles.

The Amkor bonds were seen pricing after the close of markets Thursday, and were talked to yield a coupon of 6% to 7%, with an initial conversion premium of 10% to 15%, according to a market source.

Huntington Bancshares Inc. and other financials strengthened early in the session. Huntington gained on an exchange of common for preferred stock.

But a ratings agency downgrade of Wells Fargo & Co. and Bank of America Corp. pressured those names later in the day and took the wind out of the sails of the sector in general, a sellside source said.

Alcoa Inc., which priced $500 million of five-year convertibles a week ago, extended gains as its underlying stock continued to pace gains.

But overall, convertibles activity tapered off after a busy start amid a rollercoaster in stock markets that started with gains, fell sharply, and then recouped losses to close higher.

The Dow Jones Industrial Average closed up 89.84 points, or 1.2%, to 7,749.81; the S&P 500 Index added 7.63 points, or nearly 1%, to 813.88; and the Nasdaq Stock Market gained 12.43 points, or 0.8%, to 1.528.95.

Newell adds eight

Newell Rubbermaid's newly priced 5.5% convertible bonds due 2014 ended their first day of secondary market trading at 108 versus a share price of $6.18, after having initially traded up to 111 on a slightly stronger share price.

Newell common stock ended the day down 38 cents, or 5.8%, at $6.18, after dropping 9.5% on Tuesday.

Investors snapped up Newell, which was upsized to $300 million from $250 million, and traded as high as 110 in the gray market Tuesday ahead of final pricing.

It made sense for the Atlanta-based consumer and commercial products company to upsize "with such attractive terms," a Connecticut-based sellside analyst said, citing an equity analyst's forecast that the company was going to have to refinance upcoming debt with 11% interest.

The analyst thought the upsize might have been bigger given that Newell has $761 million coming due by year-end, and management saying that it would like to preserve the company's entire $690 million revolver.

The company's leverage was a detraction for investors, but the new paper was well received anyway due in large part to its terms, valuation, and the fact that the market has been highly receptive to new issues, sources said.

"It's easy to see an attractive convertible structure and some clients do like household names. Moreover, the valuation of the company is really cheap - if the new CEO can somehow engineer a turnaround. Besides, all new convertibles are rising sharply at issue, aren't they?" a New York-based buysider said of Newell.

Standard & Poor's assigned a BBB- senior unsecured debt rating to the convertibles, citing the company's diversified portfolio of consumer products and intermediate financial policies.

The company's increased leverage, in part because of a historically acquisitive growth strategy and recently declining operating margins, are additional rating factors, the agency noted.

Fitch Ratings assigned the senior unsecured convertible notes BBB, citing a diverse product line of brand name consumer products, significant cost reduction steps taken to meet weakening global economic conditions, improving product or geographical mix, the expectation of significant commodity cost reduction in 2009, expected satisfactory credit metrics particularly as cost reductions are recognized throughout 2009 and debt is reduced, and anticipated improving liquidity, the agency said.

Autoliv mandatory improves

Autoliv's 8% mandatory convertible equity units due 2012 closed their first day of secondary market trading at 25.1 bid, 35.5 offered, versus its common stock at $16.06, which was up fractionally on the day.

"It was trading above 25 all day long," a syndicate source said.

New issues seem to be getting good marks across the board due to high demand, and Autoliv was no exception.

"There are credit investors and pension funds, and different investors that were not present even a year ago," an Autoliv syndicate source said.

The Swedish auto safety products company also priced $214 million of common stock, for a total capital raise of $364 million. Morgan Stanley & Co. was bookrunner for both offerings.

Huntington Bancshares

Huntington Bancshares' 8.5% convertible preferreds traded down to 358 Tuesday, from 379 earlier in the session, while its common shares closed at $1.62 from a session high of $1.85.

The Columbus, Ohio-based bank holding company issued 11,715,484 common shares in exchange for 53,809 shares of the perpetual convertible series A preferred stock, which will raise Huntington's tangible common equity by $53.8 million.

The exchange came at a substantial premium to recent levels, a New York-based sellside trader said, predicting that similar moves would be taken by other banks including Fifth Third Bancorp, KeyCorp and Bank of America.

The Huntington preferreds were up but came off as the overall market sold off, the trader said.

"Both Wells Fargo and Bank of America were downgraded today," the sellsider said, adding: "Not sure anyone really gives any credence to ratings agencies anymore."

He thought the next bank to do an exchange would be Fifth Third at levels similar to Huntington's.

Fifth Third's 8.5% convertible preferred shares were seen at 33 versus a share price of $2.28, compared to 30 versus $2.29 a month ago

Fifth Third is a Cincinnati-based bank holding company.

Amkor to price

The new Amkor convertibles are to be sold, via Citigroup and Deutsche Bank, to qualified institutional buyers under Rule 144A and to James J. Kim, chairman and chief executive of Amkor and Amkor's largest shareholder, and to entities controlled by Kim.

Kim and his affiliates have agreed to purchase at least $150 million of the notes and up to an additional $50 million depending on market demand.

Proceeds are expected to be used to repay debt and for general corporate purposes.

Chandler, Ariz.-based Amkor is a semiconductor test and assembly service provider.

Mentioned in this article:

Alcoa Inc. NYSE: AA

Amkor Technology Inc. Nasdaq: AMKR

Autoliv Inc. NYSE ALV

Bank of America Corp. NYSE: BAC

Huntington Bancshares Inc. Nasdaq: HBAN

Newell Rubbermaid Inc. NYSE: NWL

Wells Fargo & Co. NYSE: WFC

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