ICOS, Lattice at bat; buzz puts Nextel Partners eyeing another convert after new junk offering

By Ronda Fears

Nashville, June 16 - A surge of new deal announcements after the close provided most of the excitement for Monday's session, which one convertible trader described as "like a Friday in the summer."

The week's slate now comes to over $2 billion, with at least seven deals on tap.

ICOS Corp. shopped its $250 million deal all day but four others launched after the closing bell.

Along with the ICOS deal, Lattice Semiconductor Corp. was at bat with a $200 million overnighter with proceeds earmarked to redeem its 4.75% convertible due 2006.

There also was buzz arising from the junk bond market that Nextel Partners Inc. may soon be returning to tap convertible investors.

A high-yield market source told Prospect News that If Nextel Partners' new junk deal is a big success, which the source said there was every indication that it would be, they will probably be back with a convert in a week or so.

Indeed, another high-yield market source said Nextel Partners went very well, printing the lowest yield on a triple-C piece of paper in over 5 years.

The junk deal was boosted to $450 million from $425 million, and the eight-year senior notes sold at par to yield 8.125%, aggressively outside guidance that put the yield between 8.25% and 8.5%.

Nextel Partners plans to use those proceeds to finance the tender offer for its 14% senior discount notes due 2009.

Just five weeks ago, Nextel Partners sold an upsized $150 million of 5.5-year convertible senior notes at par to yield 1.5% with a 42.5% initial conversion premium. The greenshoe was subsequently exercised, raising it to $175 million.

The impact of a new convert on the existing Nextel Partners convert, which was sold just five weeks ago, was being pondered and uncertain since it would depend on the new terms and particularly the maturity/call schedule, one convertible market source said.

Nextel Partners' new 1.5% converts due 2008 are noncallable.

In any event, the converts shot up more than 4 points Monday on news of the junk deal to 109.625 bid, 110.625 offered. A convert dealer said talk about another convert was not widespread enough to be the cause of any of the move in the 1.5s yet.

Nextel Partners shares closed up 46c, or 7.92%, to $6.27.

Immediately at hand, convert players were looking at the ICOS and Lattice deals.

Early Monday, ICOS launched its quick-sale 20-year notes with talk of a 2.0% to 2.5% yield and 20% to 25% initial conversion premium.

The ICOS deal traded at 0.375 point over issue price in the gray market, and was last seen at 0.125 point over on the bid side with the offer at 0.5 point over. The stock closed off 19c, or 0.44%, to $42.93.

After the close, ICOS said it priced the deal with the yield of 2% at the low end of talk and the 43.4% conversion premium way higher than guidance.

Lattice didn't launch until after the close and the seven-year notes were talked to yield 0% with a 38% to 43% initial conversion premium.

The chipmaker said proceeds would be used to redeem its existing 4.75% convertible due 2006, with an estimated $172.3 million outstanding, for working capital and other general corporate purposes. The Lattice 4.75s were quoted flat at 92 bid, 94 offered. The stock had ended up 33c, or 3.92%, to $8.74.

For Tuesday's business, BioMarin Pharmaceutical Inc. and Amylin Pharmaceuticals Inc. are on the calendar.

BioMarin's deal, $125 million of five-year convertibles, was talked to yield 3.0% to 3.5% with a 30% to 35% initial conversion premium. BioMarin shares closed up 32c, or 2.62%, to $12.51.

Amylin's 150 million of five-year convertibles are talked to yield 1.25% to 1.75% with a 40% to 45% initial conversion premium. Amylin shares ended up 25c, or 0.98%, to $25.70.

Also Chubb Corp. is returning to the convertible market. The insurance concern Monday launched a $400 million mandatory talked to yield 6.5% to 7.0% with an 18% to 22% initial conversion premium, which is expected to price toward the end of the week.

Chubb's existing 7% mandatory due Nov. 16, 2005, closed Monday on the New York Stock Exchange up 0.6 point, or 2.26%, to 27.09 on heavy volume. Chubb shares soared $3.07, or 5.12%, to $63.07, also on heavy volume.

All those add to Xerox Corp.'s $650 million mandatory and a $300 million synthetic mandatory that converts into Regency Centers Corp. shares, which were put on the calendar last week. Xerox shares closed Monday up 44c, or 3.98%, to $11.49. Regency shares ended up 17c, or 0.5%, to $34.02.

Before the new deal bandwagon drove through the market, traders said it was a very uneventful day.

Some of the more recent new issues were mentioned, along with Rite Aid Corp. moving higher as reports circulated that its former chief executive was expected to plead guilty to fraud charges.

Cephalon Inc.'s new converts were seen moving higher. And, Continental Airlines Inc.'s new 5% convert continued to trot upward, gaining about 2.25 points Monday to 111.25 bid, 111.75 offered while the stock added 51c, or 3.51%, to $15.05.

Tekelec's new 2.25s, however, were lower, losing about 1 point to 99.75 bid, 100.75 offered as the stock dropped 45c, or 3.61%, to $12.

Rite Aid's 4.75% due 2006 was bid up about 4 points to 103.5 bid, 105.5 offered as the stock gained 41c, or 10.2%, to $4.43.

Dow Jones reported early Monday a person familiar with the situation said former Rite Aid CEO Martin Grass was expected to enter a guilty plea on Tuesday, just days before he was scheduled to stand trial on 35 criminal counts related to a massive accounting fraud at the drugstore chain. Reuters reported later in the day that a federal court official confirmed the plea was scheduled.

Last week, Rite Aid filed a $6 million civil suit against two other former employees and a third person, alleging they diverted money from the company for four years beginning in 1995.

Since much of the accounting problems surfaced in 1999, a massive turnover and turnaround campaign has been the focus of the drugstore chain. Also last week, the company reported same store sales in May rose 4.5%.

Franklin Brown, former vice chairman and chief counsel at Rite Aid, is also charged with fraud, obstruction of justice and other criminal counts stemming from a $1.6 billion overstatement of Rite Aid's profits in the late 1990s. Both had pleaded not guilty and had been due to go on trial on June 23. Earlier this month, former Rite Aid chief financial officer Frank Bergonzi, pleaded guilty to a charge of fraud conspiracy.

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