Avery Dennison opens higher; Freeport-McMoRan, Newmont give back gains; Countrywide, Fannie Mae plunge

By Evan Weinberger

New York, Nov. 15 - Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. gave back their Wednesday gains Thursday.

Countrywide Financial Corp. convertibles and Fannie Mae preferreds both saw steep losses.

Yahoo! Inc. convertibles edged up, and Mylan Inc. and Affymetrix Inc. watched their convertibles move in opposite directions in their second day on the market.

Avery Dennison Corp. brought its $400 million in mandatory convertible equity units in the HiMEDS structure due Nov. 15, 2020 to market with a 7.875% dividend rate and a 27% initial conversion premium Wednesday after the market close. The deal came in at the cheap end of talk, which had been for a 7.375% to 7.875% dividend and an initial conversion premium of 26% to 31%.

There is a $40 million greenshoe, and there is a settlement date of Nov. 20 on the registered transaction.

The mandatories have a threshold appreciation price of $65.09 and a minimum settlement ratio of 0.7682. There is a maximum settlement rate of 0.9756.

The mandatories are being issued at $50 per unit, and Avery Dennison will be issuing 8 million units. Each HiMEDS unit will initially consist of a contract to purchase Avery Dennison common stock and a 1/20 undivided beneficial ownership interest in a $1,000 principal amount senior note due Nov. 15, 2020. Holders of the mandatories are required to purchase Avery Dennison common stock no later than Nov. 15, 2010 under the purchase contract. Avery Dennison will make quarterly cash payments to holders in connection with interest on the senior notes and contract adjustment payments on the purchase contracts.

The mandatories have call protection for life and no puts.

Avery Dennison is a Pasadena, Calif.-based label and office products producer. The company plans to use the proceeds to repay commercial paper incurred in connection with its acquisition of Paxar Corp. in June.

The Avery Dennison mandatories moved up, as did the company's stock, but they were in the minority Thursday.

At the beginning of the day, stocks traded in a narrow range, lacking any trends, market watchers said. By the end of the day, a familiar trend had developed.

Stocks fell Thursday amid rising gas prices, downbeat earnings and guidance from J.C. Penney Co. Inc. and comments by Wells Fargo Co. comparing the current housing market to that of the Great Depression.

The Dow Jones Industrial Average fell 120.96 points, or 0.91%, for a close of 13,110.05.

The bashing of the Nasdaq continued, as the tech-heavy index fell a further 25.81 points, or 0.98%, to a close of 2,618.51.

The biggest blow was struck against the Standard & Poor's 500, which lost 19.43 points, or 1.32%, for a close at 1,451.15.

Avery Dennison has strong opening

A third new issue this week had a strong opening Thursday, as Avery Dennison's 7.875% mandatories due 2020 moved up straight away. "I never saw it underwater," one analyst said.

The new mandatories opened cheap, thus quashing a trend before it could start. Mylan and Affymetrix brought their convertibles in rich Wednesday, leaving one more to go.

One other difference between Avery Dennison's new mandatories and the new issues from Mylan and Affymetrix is volume. "A lot less fireworks than the day before with two issues that traded up significantly," another analyst said.

Avery Dennison's 7.875% mandatories due 2020, which have a par value of $50, closed at $51.25 versus a closing stock price of $52.41.

Avery Dennison stock rose $1.16, or 2.26%, on the day. "The stock got strong, so they lucked out," the first analyst said.

Mylan, Affymetrix issues mixed

Mylan's 6.5% mandatory convertible preferred stock due Nov. 15, 2010 closed Thursday at $1,015, over a par value of $1,000, versus a closing stock price of $13.97. They closed Wednesday, their first day on the tape, at $1,022 versus a stock price of $14.12.

Stock in the Canonsburg, Pa.-based drug maker (NYSE: MYL) fell 15 cents, or 1.06%.

Affymetrix saw its 3.5% convertible senior notes due Jan. 15, 2038 close Thursday at 104.4 versus a closing stock price of $21.36. They closed at 104.25 versus a stock price of $21.36.

Stock in the Santa Clara, Calif.-based genetic testing equipment manufacturer was unchanged on the day.

Mining convertibles give back gains

Phoenix-based Freeport-McMoRan reported that its copper mine in northern Chile was running at normal levels following Wednesday's 7.7 magnitude earthquake. Several strong aftershocks were reported Thursday.

Freeport-McMoRan's 6.75% mandatory convertible preferreds due May 1, 2010 closed Thursday at 146.44 versus a closing stock price of $99.77. They closed Wednesday at 154.63 versus a stock price of $104.

Much like the convertibles, stock in Freeport-McMoRan (NYSE: FCX) gave back all of the previous day's gains and then some, losing $4.23, or 4.07%, on the day.

Denver-based gold mining concern Newmont Mining saw its convertibles have a similarly gloomy day Thursday. Newmont's 1.25% convertible senior notes due July 15, 2014 close Thursday at 124.46 versus a closing stock price of $48.80. They closed Wednesday at 129.271 versus a stock price of $51.20.

Newmont's 1.625% convertible senior notes due July 15, 2017 closed Thursday at 123.812 versus a stock price of $48.80 after finishing Wednesday at 129.374 versus a stock price of $51.20.

Newmont stock (NYSE: NEM) tumbled $2.40, or 4.69%, on the day.

Mortgage convertibles hit again

Calabasas, Calif.-based Countrywide saw its stock and convertibles fall again Thursday as Wells Fargo's chief executive officer warned of further pain in the mortgage sector.

Countrywide's Libor minus 350 basis point series A convertible senior debentures due April 15, 2037 closed Thursday at 83.7231 versus a closing stock price of $12.21. They finished Wednesday at 85.8521 versus a stock price of $13.37.

Countrywide's Libor minus 225 bps series B convertible senior debentures due May 15, 2037 closed Thursday at 78.3811 versus a stock price of $12.21 after closing Wednesday at 81.0014 versus a stock price of $13.37.

Countrywide stock (NYSE: CFC) plummeted $1.16, or 8.68%, on the day.

Washington-based Fannie Mae, the government-supported mortgage backer, took a dive Thursday after federal regulators said that Fannie and its brother organization Freddie Mac were not yet totally in compliance with accounting standards established after scandals in the 1990s.

Meanwhile, Congress continues to debate new operating rules for the two government-sponsored enterprises.

While all this was going on, Fannie Mae's 5.375% series 2004-1 convertible perpetual preferred stock (NYSE: FNM-PI) lost $1.80, or 4.41%, to close at $39 on Thursday.

Fannie Mae stock (NYSE: FNM) plunged $4.78, or 10%, for a close at $43.04.

Yahoo! gains as Nasdaq loses

Sunnyvale, Calif.-based internet services provider Yahoo! saw its stock and convertibles rise Thursday even as the Nasdaq took its seemingly regular beating.

Yahoo!'s zero-coupon convertible senior notes due April 1, 2008 closed Thursday at 126.74 versus a closing stock price of $25.42. They finished Wednesday at 125.60 versus a stock price of $25.07.

Yahoo! stock (Nasdaq: YHOO) gained 35 cents, or 1.40%, in trading Thursday.

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