Xcel's new deal screams higher while others edge up, languish

By Ronda Fears

Nashville, Nov. 20 - Xcel Energy Inc.'s new deal was perhaps the biggest bet among the new deals in circulation, but it also paid off the biggest in its first day of trading.

Xcel's new 7.5% bond gained 13.25 points from par and nearly 10 points from the gray market levels.

The other four new deals from this week gained modestly, or were unchanged, although traders noted good flow on all the new paper.

Advanced Micro Devices Inc.'s new deal, while perhaps the most sensational of the group, gained 1.75 points from par but was off nearly 2 points from the gray market levels.

PacifiCare Health Systems Inc.'s deal was up 0.375 point and Scottish Annuity & Life Holdings Ltd. was unchanged.

Ligand Pharmaceuticals Inc. did not price its deal Tuesday, but sources said it was not cancelled.

"It looks like it will go, but the company hasn't given the final nod," one source said.

"The stock is down considerably since the deal was announced last week."

Ligand is pitching $135 million of five-year convertible subordinated notes talked to yield 5.75% to 6.25% with a 15% to 20% initial conversion premium; coupons are collateralized for the first two years.

"It's all very encouraging, but we're going to want to see a larger fish in the market before we concede the worst is behind us," said Jeremy Howard, head of U.S. convertible research at Deutsche Bank Securities Inc.

All together, the five deals pricing this week total just over $900 million, which despite very strong demand hasn't impressed most players.

"These deals appear very desperate and even a $200 million, especially from an energy name, just isn't anything to get excited about," said a convertible trader at a hedge fund in New York.

"There's still a lot of demand out there. These dinky deals haven't scratched the surface."

Money has been flowing into convertible funds, particularly hedge funds, instead of the reverse that had been feared heading into autumn.

CSFB/Tremont reported this week that convertible arbitrage hedge funds saw returns gain 1.03% in October for a year-to-date return of 0.41%. That compares to an overall return decline of 0.04% for hedge funds and a year-to-date gain of 0.85%.

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