Micron, Intel, ON slump on warnings; Yahoo!, Equinix up; CapitalSource, Fannie Mae rise; AMR mixed

By Evan Weinberger

New York, Oct. 3 - Micron Technology Inc., Intel Corp. and ON Semiconductor Corp. all struggled to varying degrees Wednesday as the semiconductor sector slid on fears of a slowdown soon. Two other computer-related convertibles, Yahoo! Inc. and Equinix Inc., had fine trading days.

In the financials sector, CapitalSource Inc. and Fannie Mae convertibles both traded up. And in transportation, AMR Corp. convertibles had a mixed day Wednesday.

Wednesday was a big day for new issues, especially overseas. Four new deals priced, one more was set to announce terms after market close and a fifth announced plans to launch a new convertible issue.

Even with all the new deals, trading activity is still just coming back to what analysts and traders say is normal activity. "It felt a little better," one analyst said of Wednesday's convertibles market sentiment and action.

A trader, however, said he wished he had seen some more activity.

Speaking of coming back, the equity markets had their second consecutive down day following Monday's massive, quarter- and month-opening rally. With third-quarter corporate earnings and the jobs report on tap, investors weren't feeling terribly perky Wednesday, and all three major American stock indices fell.

The Dow Jones Industrial Average was down 79.26 points, or 0.56%, to close at 13,968.05.

The Nasdaq skidded 17.68 points, or 0.64%, for a 2,729.43 close. And the Standard & Poor's 500 closed at 1,539.59, a give-back of 7.04 points, or 0.46%.

New issues a global village

CapLease, Inc. priced $75 million in 7.5% convertible senior notes due Oct. 15, 2027 with an initial conversion premium of 15% Tuesday after the market close. The deal came in at the cheap end of talk, which had been for a coupon of 7% to 7.5% and an initial conversion premium of 15% to 20%. There is a $25 million over-allotment option. The deal is set to close Oct. 9.

The convertibles have a conversion price of $11.32 and a conversion ratio of 88.3704. There is a contingent conversion subject to a 130% hurdle. The convertibles have call protection until Oct. 5, 2012. There are puts on Oct. 1 in each of 2012, 2017 and 2022.

CapLease is a New York-based commercial real estate investment trust. CapLease plans to use the proceeds to repurchase shares of its common stock upon closing and for general corporate purposes, including repayment of outstanding debt and new investment.

Coming in from Frankfurt by way of Singapore, Global Voice Group Ltd. priced €27 million in 3% convertible bonds due 2012. The convertibles have a redemption price of 129.35% of the initial offering of the principal amount, for a maximum value of €32 million.

DBS Bank Ltd. is the bookrunner of the Regulation S transaction. The settlement date is expected to be Oct. 25. There is a €5 million over-allotment option. The conversion price is S$0.191 per share, and the exchange rate is set at S$2.1. The convertibles will be listed on the Singapore Stock Exchange. The convertibles have a contingent conversion beginning on Oct. 3, 2010 subject to a 130% hurdle.

Global Voice Group owns and operates Europe's highest-capacity fiber optic network and has its financial headquarters in Singapore. It is traded in Europe as euNetworks and has its European headquarters in Frankfurt. Global Voice Group plans to use the proceeds to repay existing debt, to fund investment and capital expenditures and for general corporate purposes.

Coming in from Mumbai, India, Everest Kanto Cylinder Ltd. priced $35 million in zero-coupon foreign currency convertible bonds due Oct. 10, 2012 to yield 7.25% with an initial conversion premium of 30%.

The convertibles will be redeemed at 142.801% of par at maturity and have a conversion price of Rs. 303.36. The deal is expected to close Oct. 10.

The convertibles carry a reset feature that will become active on Oct. 9, 2008 subject to a floor of 85% of the initial conversion price. Beginning Oct. 9, 2010, there is a contingent conversion subject to a 130% hurdle.

Everest Kanto is an industrial cylinder producer. The company plans to use the proceeds to import plant and machinery into India, for investments in subsidiaries and joint ventures or potential acquisitions outside India and for general corporate purposes.

Saving the biggest for last, Banco Santander SA priced an upsized €7 billion in convertible bonds due Oct. 3, 2012. The convertibles have a 7.25% coupon in the first year. After the first year, the convertibles will carry a floating-rate coupon of three-month Euribor plus 275 basis points. The convertibles have an initial conversion premium of 16%.Talk had the initial conversion premium at 20%.

The convertibles were distributed to Spanish customers through Banco Santander's retail banks. According to Banco Santander, 129,000 investors made an average €54,000 investment.

The bank is part of a consortium, led by the Royal Bank of Scotland plc and also including Fortis NV, which is offering €71.7 billion for Amsterdam-based ABN Amro. If the acquisition of ABN Amro is not completed within one year of issuance, the convertibles will be called at a 107.5%.

Banco Santander is Europe's second-largest bank and is based in Santander, Spain. Barclays Bank plc is preparing a rival bid for the largest Dutch bank.

Also announcing an oncoming deal was Molina Healthcare, Inc. Molina, a Long Beach, Calif.-based health management organization that works with low-income people on Medicaid and other government assistance programs. The convertibles are talked at a coupon of 3.75% to 4.25% and an initial conversion premium of 30% to 35%.

Excel Maritime ahoy!

And one deal was set to price Wednesday after the market close. Excel Maritime Carriers Ltd. announced the launch of $100 million in convertible senior notes due 2027 Tuesday after the market close. The convertibles are talked at a coupon of 1.875% to 2.375% and an initial conversion premium of 50% to 55%. There is a $25 million greenshoe.

There is call protection for the first seven years and puts in 2012, 2017 and 2022, as well as a contingent conversion subject to a 125% hurdle. There are standard dividend and takeover protections. The convertibles are scheduled to price Wednesday after the market close.

Excel Maritime Carriers is an Athens, Greece-based seaborne dry bulk transportation company. The company plans to use the proceeds for general corporate, including the possible acquisition of new vessels and paying down debt.

And to one analyst, the Excel Maritime convertibles don't look like a bad deal. "EXM looks decent, very high premium but a decent company with nice volatility," he said.

The analyst didn't like the seven-year put on the convertibles or some aspects of the structure, however.

Semiconductors slip

Amid slumping earnings from some firms and an analyst report that noted chip shipments were moving faster than new computer shipments, the semiconductor sector may just be bracing for some difficult times.

And stocks and convertibles from several semiconductor producers bore the brunt of the bad sentiment - and poor earnings.

Boise, Idaho-based Micron saw its convertibles fall and its stock dive a day after announcing a quarterly loss for the fiscal fourth quarter Tuesday. The loss, Micron said, was due to a slump in sales in its memory products.

Micron's 1.875% convertible senior notes due June 1, 2014 closed Wednesday at 96.25 versus a closing stock price of $10.74. They closed Tuesday at 97.25 versus a stock price of $11.79.

Micron stock (NYSE: MU) stumbled Wednesday, losing $1.05, or 8.91%.

The big boy in semiconductors, Santa Clara, Calif.-based Intel, had a rougher day in convertibles, but its stock losses were muted. Intel's 2.95% junior subordinated convertible notes due Dec. 15, 2035 closed Wednesday at 101.25 versus a closing stock price of $25.81. They finished Tuesday at 105.054 versus a stock price of $26.38.

Intel stock (Nasdaq: INTC) screeched to a loss of 57 cents, or 2.16%.

Phoenix-based ON Semiconductor fared the best of the small sample. ON's 2.625% convertible senior subordinated notes due Dec. 15, 2026 closed Wednesday at 137.75 versus a closing stock price of $12.40. They finished Tuesday at 138.206 versus a stock price of $12.47.

ON stock (Nasdaq: ONNN) slipped 7 cents, or 0.56%, on Wednesday.

Other techs don't

It wasn't all morbid in the tech sector Wednesday.

Sunnyvale, Calif.-based Yahoo saw its zero-coupon convertible senior notes due April 1, 2008 close Wednesday at 134.25 versus a closing stock price of $27.17. The convertibles finished Tuesday at 132.755 versus a stock price of $26.95.

Yahoo stock (Nasdaq: YHOO) added 22 cents, or 0.82%, on Wednesday.

And Foster City, Calif.-based information technology network services provider Equinix saw its 3% convertible subordinated notes due Oct. 15, 2014 close at 109.825 versus a closing stock price of $92.43. The convertibles closed Tuesday at 109 versus a stock price of $91.63.

Equinix stock (Nasdaq: EQIX) gained 80 cents, or 0.87%, on Wednesday.

Financials mixed

With many, though not all, analysts thinking that the worst of the credit crunch may be in the past, financial stocks and convertibles were mixed Wednesday.

Chevy Chase, Md.-based small business services firm CapitalSource's convertibles were up on the day. CapitalSource's 7.25% senior subordinated convertible notes due July 15, 2037 leaped to par versus a closing stock price of $21.07. They finished trading Tuesday at 94.96 versus a stock price of $21.51.

Stock in CapitalSource didn't have quite as good a day, tumbling 44 cents, or 2.05%, on Tuesday.

Washington-based government-backed mortgage backer Fannie Mae rose even as the political fight over aid to homeowners facing foreclosure heated up.

Fannie Mae's 5.375% series 2004-1 convertible perpetual preferred stock closed Wednesday at $43.10. The preferreds (NYSE: FNM-PI) gained 55 cents, or 1.29%, on Wednesday.

Fannie Mae stock (NYSE: FNM) gained 96 cents, or 1.48%, to close at $66.04 on Wednesday.

AMR up as report slams industry

Passengers may be unhappy with airlines - a report released Wednesday revealed that 30% of all flights in the United States arrived late in August - but investors had mixed feelings about Fort Worth, Texas-based AMR and its convertibles. AMR is the parent company of American Airlines.

AMR's 4.25% convertible senior notes due Sept. 23, 2023 closed Wednesday at 151.5 versus a closing stock price of $24.77. They opened trading Tuesday at 152.038 versus a stock price of $24.84.

AMR's 4.5% convertible senior notes due Feb. 15, 2024 closed Wednesday at 129 versus a stock price of $24.77. They finished Wednesday at 127.057 versus a stock price of $24.84.

AMR stock (NYSE: AMR) slipped 7 cents, or 0.28%, on Wednesday.

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