Triumph, AmeriCredit gain, Corporate Office flat; PolyMedica, Bristow up in the gray; New Plan prices

By Kenneth Lim

Boston, Sept. 13 - New deals continued to fuel market activity on Wednesday, with most of the newly issued convertibles improving on their first day of trading.

Triumph Group Inc.'s deal, which was priced a day earlier than expected, and AmeriCredit Corp.'s two-tranche offering both opened better, but Corporate Office Properties Trust's new paper struggled to beat par.

Meanwhile, PolyMedica Corp.'s planned $150 million deal was bid up in the gray market as investors described the offer as the most attractive among those expected to price Wednesday. Bristow Group Inc.'s planned $200 million offering also improved in the gray market on optimism about the stock.

New Plan Excel Realty Trust Inc.'s $175 million deal was seen as fairly priced after it was reoffered at 99, although the initial conversion premium arrived at the rich end of talk.

The brisk pace in the primary market spilled over into the secondary.

"It was really active pretty much across the board," a sellside convertible strategist said. "We saw good two-way interest in biotech names, like ImClone, Human Genome Sciences, Gilead, and good two-way flow in oilfield services names like Nabors."

The sellsider said it was not clear what drove that volume, but speculated that the market may have been reacting to the rash of new deals.

"Maybe some people were reallocating," the sellsider said.

Triumph gains on debut

Triumph's newly priced 2.625% convertible due 2026 opened about 1.5 to 2 points above par on Wednesday after the deal was priced a day earlier than expected.

"They did pretty well," a buyside convertible bond trader said. "They were better from the start."

The convertible was seen at 101.875 bid, 102.125 offered against a stock price of $40.87 on Wednesday. Triumph stock (NYSE: TGI) closed at $40.85 on Wednesday, down by 0.97% or 40 cents.

Triumph on Tuesday priced the $175 million offering of convertible senior subordinated notes within talk, at a coupon of 2.625% and an initial conversion premium of 32%.

The convertibles were offered at par, and were originally expected to price Wednesday after the market closed. Price talk guided for a coupon of 2.375% to 2.875% and an initial conversion premium of 30% to 35%.

There is a greenshoe option for a further $26.25 million.

Bank of America was the bookrunner of the Rule 144A offering.

Triumph, a Wayne, Pa.-based maker of aircraft components, will use the proceeds of the deal to prepay its existing class A and B senior notes due 2012 and to repay part of a revolving credit line. Triumph said part of the reason for paying down that debt was to remove covenants in the senior notes that would give the company more flexibility in making acquisitions.

"It's not the most attractive piece of paper that I've seen," a convertible bond analyst said of the deal before it priced. Although Triumph was a "great little company and all," the deal was only about 1% cheap at the final pricing, the analyst said.

A sellsider felt that Triumph's offering was more attractive, modeling about 1.75% cheap at the mid-point of talk.

"It looks decent," the sellsider said.

AmeriCredit starts higher

AmeriCredit's two new convertible series also traded higher off the bat after they priced within talk.

The 0.75% convertible due 2011 finished at about 102.875, while the 2.125% convertible due 2013 ended at 102.125, with AmeriCredit stock (NYSE: ACF) gaining 2.17% or 53 cents to close at $24.94.

"They did OK," a buyside convertible bond trader said. "It's not huge, but it's all right."

AmeriCredit's $500 million offering of convertible senior notes were offered at par late Tuesday. The five-year tranche was set at a coupon of 0.75% and an initial conversion premium of 15%, within original talk at a coupon of 0.625% to 1.125% and an initial conversion premium of 13% to 17%.

The seven-year tranche was set at a coupon of 2.125% and an initial conversion premium of 25%, while price talk was for a coupon of 2% to 2.5% and an initial conversion premium of 23% to 27%.

Each $250 million tranche has an over-allotment option for a further $25 million.

JP Morgan, Credit Suisse and Deutsche Bank were the bookrunners of the Rule 144A deals.

AmeriCredit, a Fort Worth, Texas-based sub-prime consumer finance company, said it will use the proceeds of the offering to buy back $200 million of its common stock and to enter into convertible note hedge and warrant transactions. The rest of the proceeds will be used for general corporate purposes.

A sellsider said the deal was warmly received by investors.

"People liked that deal," the sellsider said. "The As traded better, which makes sense because they're shorter than the Bs."

Corporate Office struggles

Corporate Office Properties' newly priced 3.5% exchangeable due 2026 was lower to flat for most of its debut on Wednesday, as investors saw it as one real estate investment trust deal too many.

"It didn't do that well," a buysider said. "The stock went up a little bit, so it's going to look a little better on swaps, but it was 99.75 to par all day versus the open."

Corporate Office stock (NYSE: OFC) gained 0.55% or 25 cents to close at $45.50.

The $175 million deal priced Tuesday after the market closed, at a coupon of 3.5% and an initial exchange premium of 20%. The notes, which were offered at par, were talked at a coupon of 3.125% to 3.625% and an initial exchange premium of 20% to 25%.

There is a greenshoe option for a further $25 million.

Bank of America and JP Morgan were the bookrunners of the Rule 144A offering.

Corporate Office Properties, a Columbia, Md.-based developer of suburban office properties, said it will use the proceeds of the deal to repay several construction loans and an unsecured revolving credit line.

PolyMedica gets thumbs up

PolyMedica's $180 million of five-year convertibles, which includes an exercised $30 million greenshoe, saw better bids in the gray market on Wednesday before the deal priced at the rich end of talk.

The convertible was 101.75 bid, 102.5 offered in the gray market on Wednesday. PolyMedica stock (Nasdaq: PLMD) finished at $42.02, up by 2.11% or 87 cents.

"It's probably the better of all those [pricing Wednesday]," a buysider said.

PolyMedica on Wednesday priced the deal at a coupon of 1% and an initial conversion premium of 14%. Price talk was for a coupon of 1% to 1.5% and an initial conversion premium of 10% to 14%.

The notes were offered at par.

Bank of America and Deutsche Bank were the bookrunners for the Rule 144A offering.

PolyMedica, a Wakefield, Mass.-based provider of healthcare products and services for patients of chronic diseases, said it will use the proceeds of the offering to concurrently buy back about $29 million of its common stock from convertible purchasers, representing the 705,000 shares remaining in its current stock repurchase program. The proceeds will also be used to fund convertible note hedge and warrant transactions, and to pay off about $94 million of outstanding bank debt.

"It models cheap," a sellside convertible analyst said. "But with the common dividend yield as high as it is, there's a negative carry. But people really, really seem to like it. What makes it attractive is the low premium."

The convertible will tend to be more stock-like, and most equity analysts are bullish on the company's shares, the sellsider added.

Another convertible bond analyst said the deal modeled "extremely cheap" at about 102 to 103 at the midpoint of talk, and most investors should find something to like about the deal.

"Anybody who likes the equity would be positive toward the low premium," the analyst said. "The arb accounts, I think it's an interesting vol-spread pairing."

Bristow better in gray

Bristow's planned $200 million offering of mandatory convertible preferreds continued to trade above par in the gray market, seeing bids of about 100.063 on Wednesday.

Bristow stock (NYSE: BRS) slipped 0.06% or 2 cents to close at $35.26.

The deal was talked at a dividend of 5.25% to 5.75% and a threshold appreciation range of 20% to 25%, with pricing expected after the market closed. Each preferred was being offered at par of $50 apiece.

There is a greenshoe option for a further $30 million, or 600,000 preferred shares.

Credit Suisse and Goldman Sachs were the bookrunners of the registered off-the-shelf deal.

Bristow, a Houston-based provider of helicopter services to the offshore oil and gas industry, plans to use the proceeds of the deal to fund aircraft purchases. Upon the completion of the offering, Bristow will exercise options it currently has to acquire additional large aircraft.

A sellside convertible bond analyst said the deal seemed attractive partly because "there's good stock upside."

"They've been largely ignored by the market because of the bribery scandal and recently with the Department of Justice investigations [into price-fixing allegations]," the analyst said. "But their market is strong on the demand side."

The analyst noted that the company is expanding its helicopter fleet. "There's not enough helicopters to meet demand, and there's tight supply from the suppliers, and they do have pricing power," the analyst said.

As for the regulatory issues that have been casting a shadow over the stock, the analyst reckoned that the market may have already priced those concerns into the stock price.

"Over time I think we're going to see the resolution of those issues...maybe a fine on the bribery side, and the DOJ investigation doesn't seem to be turning up much at this moment," the analyst said.

A buysider was more cautious, saying that interest in mandatories may be limited.

Another convertible analyst thought that the Bristow deal may perform decently.

"People like the space, and mandatories have done well this year," the analyst said. "It's something worth looking at."

New Plan reoffers deal

New Plan Excel Realty's $175 million of 20-year convertible senior unsecured notes received mixed reviews on Wednesday before the deal was reoffered and priced within talk after the market closed.

"It looks OK, I guess, at 99," a sellside convertible analyst said. "At 99 it's like an 18.25% implied vol, which isn't bad, it's just another in a long line of REIT issuers that are taking advantage of the strong equity market by issuing a convertible."

New Plan's deal was reoffered at 99, with a coupon of 3.7% and an initial conversion premium of 22%.

The deal was talked at a reoffered price between 99 and 99.25, and at a coupon of 3.7% with an initial conversion premium between 20% and 22%.

There is an over-allotment option for a further $25 million.

Merrill Lynch and Bank of America were the bookrunners of the Rule 144A offering.

A syndicate source said the deal was a "very positive transaction" that received "very high" interest from investors.

New Plan, a New York-based real estate investment trust focusing on community and neighborhood shopping centers in the United States, said it will concurrently buy back $50 million of its common stock with the proceeds of the deal. It will also repay a $350 million revolving credit line and fund general corporate purposes.

New Plan stock (NYSE: NXL) closed at $26.83 on Wednesday, down by 0.89% or 24 cents.

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