Alcatel-Lucent up on new issue; AMD a little weaker; Archer-Daniels-Midland adds; Beazer eyed

By Rebecca Melvin

New York, Sept. 2 - Alcatel-Lucent's convertibles were active and a little higher on Wednesday after word that the Paris-based communications company was pricing a new convertible issue in Europe to yield 5% to 5.5%, with an initial conversion premium of 35%.

The issue was upsized to €1 billion, including the over-allotment option, and priced at the rich end of talk to yield 5% by the end of the session.

Advanced Micro Devices Inc. convertibles, which have recently been active in trade, eased on Wednesday despite a move to the upside in their underlying shares, which ended higher by more than 1%.

Archer-Daniels-Midland Co.'s convertibles added in active trade amid no particular news, and the company's stock slipped 1.7% in average trading volume.

Beazer Homes USA Inc. convertibles were in focus as the Atlanta-based homebuilder marketed $160 million of 12% senior secured straight notes due 2017.

K-V Pharmaceutical Co. was also getting a look, but not in trade, as the specialty drug maker appeared to be closer to being able to resume manufacture of its products.

Overall, the market Wednesday was described as "really quiet and slow," and it was expected that the week's remaining two sessions ahead of the Labor Day holiday weekend would unfold similarly.

"The next couple of sessions are going to be just pitiful," a New York-based sellside trader said.

New issue lifts Alcatel-Lucent

Alcatel-Lucent's 2.875% convertibles of 2023 ended higher by about 0.5 point at 97.875, while a sellside source reported a trade of the 2.875% paper, which is putable in June 2010, at as high as 98.25.

The Alcatel-Lucent 2.75% convertibles of 2025 added about 2.25 points to 82.25.

The paper traded in good volume after word that Alcatel-Lucent was pricing a deal in Europe of €750 million of convertibles, with a €112.5 million over-allotment option.

Later in the session, the company announced that it was upsizing the issue to €870 million, with an over-allotment option that pulled the deal up to €1 billion. And the deal priced at the rich end of talk to yield 5% with an initial conversion premium of 35%.

The company also announced that with the proceeds it intends to repurchase up to €204.5 million, or 20%, of its 4.75% Oceane convertible bonds due Jan. 1, 2011, of which about €1.022 billion is outstanding.

The new convertible bonds, also in the Oceane structure, are set to mature Jan. 1, 2015.

They priced at the rich end of talk, which was for a coupon of 5% to 5.5%, via joint managers Calyon, Credit Suisse Group AG, HSBC Holding plc, Morgan Stanley and Societe Generale SA.

AMD a little weaker

AMD's 6% convertibles due 2015 slipped to 65 bid, 66 offered on Wednesday from about 66.75 bid, 67.25 offered on Monday.

AMD 5.75% convertibles due 2012 were at 79 at the end of the session, compared to 80.25 on Monday.

The Archer-Daniels-Midland 0.875% convertibles due 2014 traded up to 97 versus a share price of $27.75, according to a sellsider. Trace bond pricing data put the ADM convertibles at 96.134 at the end of the session, which was 1.134 point higher than the previous session's price.

The sellsider said there didn't appear to be any significant news on ADM that would boost activity or pricing.

Beazer stronger

The market for Beazer Homes' 4.625% convertibles due 2024 was stronger at 84 bid, 89 offered Wednesday, but a trade also printed at 82, which was below market and "made no sense," a New York-based sellside trader said.

Shares of the Atlanta-based builder of single-family homes edged up 3 cents, or 0.75%, to $4.03.

Beazer is marketing $160 million of 12% senior secured notes due 2017, which is expected to price during the Sept. 7 week. The deal is being sold via bookrunner Citigroup Global Markets Inc.

The senior notes offering was viewed favorably. "It extends the life of these small companies," a market source said of the straight note offering.

Beazer was believed to be attempting to price the notes on Wednesday. However, no terms could be obtained even late in the day.

Proceeds from the Rule 144A and Regulation S offering will be used to fund - or replenish cash that has been used to fund - open-market repurchases of the company's outstanding senior notes that it has made or that it has agreed to make since April 1, 2009.

K-V Pharma looks stronger

K-V Pharmaceutical 2.5% convertibles due 2033 weren't seen in trade, but the paper was offered in the low 60s compared to a previous market in the middle 50s.

"The bonds didn't trade, so I can't say what the market is without a bid," a market player said. "But everyone has been waiting on them being able to manufacture."

The St. Louis-based specialty pharmaceutical maker said that it has presented a work plan to the U.S. Food and Drug Administration that is required before the company can resume manufacture and distribution of approved drug products marketed by its subsidiaries, Ethex Corp. and Ther-Rx Corp.

As previously reported, K-V Pharmaceutical has disclosed in a filing that there is substantial doubt about its ability to continue as a going concern in the upcoming fiscal year.

If it is able to maintain its projected cash expenditures and monetize its auction-rate securities, the company said it will have enough cash to meet expected near-term obligations during the quarter ending Sept. 30. But it will need to obtain additional capital through asset sales and external financing.

Morris Anderson & Associates Ltd. was hired to advise K-V Pharmaceutical on restructuring its financial operations and on its cash management efforts, and it has retained Robert W. Baird & Co. Inc. to help it raise additional capital.

K-V said a board of directors audit committee and FDA regulatory counsel conducted an internal investigation of allegations involving FDA regulatory and other compliance matters and management misconduct.

The investigation was completed in June, and the board has approved a framework of recommended remedial measures.

K-V said its actions and the requirements under the FDA consent decree have had an adverse effect on its liquidity position, and it does not expect to generate significant revenues until it can resume shipping many of its approved products.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Alcatel-Lucent NYSE: ALU

Archer-Daniels-Midland Co. NYSE: ADM

Beazer Homes USA Inc. NYSE: BZH

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