LDK paper jumps on new borrowing agreement; AirTran surges on merger deal; Newpark on tap

By Rebecca Melvin

New York, Sept. 27 - LDK Solar Co. Ltd. gained nearly 4 points in active trade in the convertible bond market Monday on news that the Chinese solar power company has sealed a new $8.9 billion borrowing agreement with the Chinese government's China Development Bank.

AirTran Holdings Inc. surged after Southwest Airlines announced that it has entered into a definitive agreement to acquire all of the outstanding common stock of AirTran Holdings Inc., the parent company of AirTran airways, for a combination of cash and Southwest Airlines common stock.

Take-Two Interactive Software Inc.'s 4.375% convertible senior notes due 2014 changed hands at steady pricing even as shares slipped after UBS launched coverage on the New York-based video game publisher with a neutral and set an $11.00 price target.

Human Genome Sciences Inc.'s 2.25% convertibles due 2012 were also in trade at 180 versus a share price of $29.10.

Meanwhile, the recently priced Volcano Corp. 2.875% convertibles climbed to 109 versus a share price of $24.95.

In the primary arena, Newpark Resources Inc. plans to price $150 million of seven-year convertible notes after the close of markets Tuesday that were talked to yield 4% to 4.5% with an initial conversion premium of 27.5% to 32.5%, according to a syndicate source.

Overall, however, the market was described as mostly quiet.

Other than the LDK Solar and AirTran trade, there was "not too much happening today," a New York-based sellside desk analyst said.

"The name of the day was LDK," another trader agreed, on the name that topped the most-actives list.

LDK adds nearly 4 points

LDK's 4.75% convertibles due 2013 traded up to 98 versus a share price of $10.00, which compared to 93.93 previously.

Trades in the 4.75% convertibles were also at 97.75, another sellsider said.

Shares of the Xinyu City, China-based solar power company jumped $1.60, or 18%, to $10.45 in heavy volume.

It was the most active name on Monday in terms of the number of bonds trading, with action seemingly driven by the new borrow facility. Other factors that played into the action were a downgrade for a competitor and the underlying stock hitting a new 52-week high, a West Coast-based sellsider commented.

At the 98 price, "the bonds are yielding 8.6% for less than a year paper. There is a story," the sellsider said.

LDK makes solar wafers and other photovoltaic products. The deal that it sealed with China Development Bank provides the solar company 60 billion renminbi, or about $8.9 billion, in credit over the next five years, which will be used to fuel LDK's expansion efforts.

The company is looking at opportunities to increase capacity or market share in Asia, Europe and the United States, as well as lower costs.

AirTran takes flight

AirTran's 5.25% convertibles due 2016, the more actively traded of two AirTran convertible issues, were seen trading at 140 versus a share price of $7.35, according to a Connecticut-based sellside trader.

A second, less actively traded convertible, the AirTran 5.5% convertibles due 2015, traded above 200 from about 139 bid, 140 offered.

Shares of the Orlando, Fla.-based scheduled airline service company surged $2.79, or 61%, at $7.34 on Monday.

The new transaction values AirTran common stock at $7.69 per share, or about $1.4 billion in all, including AirTran's outstanding convertible notes, based on Southwest Airlines' closing stock price of $12.28 on Sept. 24. That represents a premium of 69% over the Sept. 24, closing price of AirTran stock, according to a news release.

Under the agreement, each share of AirTran common stock will be exchanged for $3.75 in cash and 0.321 of a share of Southwest Airlines' common stock, subject to certain adjustments, based on Southwest Airlines' share price prior to closing.

Including the existing AirTran net debt and capitalized aircraft operating leases, the transaction value is about $3.4 billion.

Closing is subject to the approval of AirTran stockholders, receipt of regulatory clearances and fulfillment of customary closing conditions.

The acquisition is aimed at allowing Southwest to expand in key markets, like New York LaGuardia, Boston Logan, and Baltimore/Washington, as well as in smaller domestic cities that the company currently does not serve.

Bob Fornaro, AirTran Airways' chairman, president and chief executive, said, "This agreement is great news for our crew members, our shareholders, our customers and the communities we serve. Joining Southwest Airlines will give us opportunities to grow, both professionally as individuals and as a group, in ways that simply would not be possible without this agreement."

AirTran revenue and operating income, excluding special items, for the 12 months ended June 30, were $2.5 billion and $128 million, respectively. Southwest Airlines' revenue and operating income, excluding special items, for the 12 months ended June 30, were $11.2 billion and $843 million, respectively.

Newpark to price

Newpark's registered, off-the-shelf offering is being sold via bookrunner J.P. Morgan Securities LLC. Bank of America Merrill Lynch is the senior co-manager with Wells Fargo Securities and Raymond James & Associates acting as co-managers. There is an over-allotment option for an additional $22.5 million of notes.

Shares of the Woodlands, Texas-based diversified oil and gas industry supplier fell in after-hours trading, which is when the deal was launched. Shares ended the session at $8.70, down 35 cents, or nearly 4%, and then shed another 56 cents, or 6%, in after-hours trading.

Newpark provides drilling fluids, temporary worksites and access roads for oilfield and other commercial markets.

The notes will be non-callable, with no puts. They are convertible at any time into shares of the company's common stock.

Proceeds from the offering are earmarked to repay existing debt under Newpark's credit facility and for general corporate purposes.

Mentioned in this article:

AirTran Holdings Inc. NYSE: AAI

Human Genome Sciences Inc. Nasdaq: HGSI

LDK Solar Co. Ltd. NYSE: LDK

Newpark Resources Inc. NYSE: NR

Take-Two Interactive Software Inc. Nasdaq: TTWO

Volcano Corp. Nasdaq: VOLC

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