Jarden trades modestly better; Exide tanks on bankruptcy chatter; Dominion little changed

By Rebecca Melvin

New York, June 7 - Jarden Corp.'s newly priced 1.5% convertibles were flat to modestly better with the underlying shares edging up Friday after the Rye, N.Y.-based consumer products company priced $250 million of the six-year convertible senior notes at the cheap end of talk.

The new Jarden paper was allocated mostly to outright players interested in the company's fundamental story and to holders of the existing Jarden 1.875% convertibles, a syndicate source said.

Despite pricing without a call spread or concurrent stock sale, Jarden shares barely moved on Thursday after the deal launch, which was "amazing," the source said. Typically, "the stock has been down 4%, on average," following launch of a convertible deal without those features, the source said.

Elsewhere, Exide Technologies Inc.'s convertibles cratered to 9 bid after a news article Friday said the Milton, Ga.-based car and machine battery maker is preparing for a potential bankruptcy filing by this summer. The small, $55.8 million issue of Exide convertibles, which matures in September, had previously been 30 bid, 40 offered.

Dominion Resources Inc.'s $1 billion of new convertible equity units, which priced early this week, were little changed at about 49 bid, 49.375 offered versus an underlying share price of $55.20. The Richmond, Va.-based energy company had reoffered the paper at $49 compared to their $50 par.

Overall, the convertible market on Friday was soft as has been the case all week. Selling was said to have slowed Thursday. "But stuff is a little heavy, particularly the longer-dated maturities," a New York-based trader said. "The shorter dated paper is doing OK."

Other market sources concurred, saying that the market tone was weak but that trading volume was light so it was difficult to ascertain exactly where the market was.

Sources said the down move was related to a long and far run up in which the convertible market "got ahead of itself" and now it was pulling back amid uncertainty about where the broader markets and interest rates are heading.

The tone was contrary to the broader markets, which were in rally mode after release of the May jobs report early Friday. The jobs report was in line with expectations but not strong enough, investors believed, to encourage early tapering by the Federal Reserve of its bond buying program and accommodation policies.

The fact that the convertibles market was out of step with the broader market gave credence to the idea that convert players were not driven so much by fear or uncertainty but by the fact that the market had gotten ahead of itself particularly for the five- to seven-year duration convertibles and vol. sensitive issues.

"It's got to correct. Treasuries are lower here, yields are moving up. I think today is a relief as far as the jobs report, which came at the sweet spot, and with the prior month being revised lower, so the Fed can't curtail buying too soon," a New York-based trader said.

The Labor Department's monthly employment report showed that the U.S. added 175,000 jobs in May, which was in line to slightly above expectations. The unemployment rate rose slightly to 7.6% from 7.5% as more people entered the workforce. Economists had expected payrolls to rise by 169,000 jobs and for the unemployment rate to hold steady. The report pointed to no immediate change in Fed policy.

Stocks rallied. The Dow Jones industrial average jumped 207.5 points, or 1.4%, to 15,048.12; the S&P 500 stock index climbed 20.82 points, or 1.3%, to 1,643.38; and the Nasdaq stock market gained 45.16 points, or 1.3%, to 3,469.21.

Jarden flat to better

Jarden's newly priced 1.5% convertible bonds were trading around par early Friday and edged higher to about 100.25 bid, 100.50 offered versus an underlying share price of $45.45 in early afternoon.

Jarden shares were up about 1%.

"It was wrapped around par and now you could say it's modestly better with the stock," a New York-based trader said.

Jarden priced $250 million of the six-year convertible senior notes at par to yield 1.5% with an initial conversion premium of 30%.

The Rule 144A deal priced at the cheap end of talk, which was for a 1% to 1.5% yield and 30% to 35% premium.

"I didn't like it. I thought the valuation was rich at the cheaps," a trader said.

Joint bookrunners were Barclays, J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

The deal was marketed to mostly outright players given that the pricing was so aggressive looking at the vol. and credit assumptions.

"It was difficult to look at some of those metrics and say this is very attractive. But if you were long only, this is a great piece of paper, compared to recent deals that were done with 0.25% coupon and 32.5% premium," a syndicate source said.

"It was a clear bifurcation. Optically, this was attractive, but once you put the numbers in the model, it was an aggressive valuation. So for one side, it was too rich, and for the other, it wasn't so bad," the syndicate source said.

He cited other recent new issues including Concur Technologies Inc., which came with a 0.5% yield and 32.5% premium, and Shutterfly Inc. and NetSuite Inc., which both came with a 0.25% yield and a 35% premium.

He said the deal was trading close to par in the early going or up slightly.

The syndicate source thought that new issuance would continue to be fairly strong as long as the stock market stabilized and continued to get better.

Proceeds will be for general corporate purposes.

The notes are non-callable for life with no puts. There is contingent conversion if shares exceed 130% of the conversion price. The notes are also dividend and takeover protected.

Jarden is a Rye, N.Y.-based consumer products company.

Exide tanks

Exide's floating-rate convertibles, of which only $55.8 million are left outstanding, fell to 9 bid flat, or without accrued interest, a New York-based trader said. Exide shares fell 14 cents, or 40%, to $0.2219.

A couple of days ago, the convertibles were quoted at 30 bid, 40 offered, the trader said.

The issue was first smacked down in early April to about 64 from 95 and the stock fell to $1.37 after word that the company hired Lazard to be its financial adviser.

Friday's article by the Wall Street Journal quoted an unnamed source, saying Exide was preparing a potential bankruptcy protection filing by this summer.

Exide reported a loss for its most recent quarter, and operations are suspended at one its battery recycling facilities in California due to allegations that the company's storm water system violated state regulations. The Vernon, Calif.-based plant was shuttered in April and supplies a significant portion of its domestic lead requirements.

Exide has about $700 million in debt, including the $55.8 million in convertibles, which are due Sept. 18.

Mentioned in this article:

Dominion Resources Inc. NYSE: D

Exide Technologies Inc. Nasdaq: XIDE

Jarden Corp. NYSE: JAH

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