Countrywide, Fannie Mae, Standard Pacific up on subprime deal talk; tech concerns drag down Intel, AMD

By Evan Weinberger

New York, Nov. 30 - Reports of a federal government plan to ease the mortgage crisis drove up Countrywide Financial Corp., Fannie Mae and Standard Pacific Corp. WCI Communities Inc. and E*Trade Financial Corp., however, didn't participate in the rally.

Disappointing earnings from Dell Inc. drove down Intel Corp. and Advanced Micro Devices Inc. convertibles, and tech stocks more broadly.

XM Satellite Radio Inc. convertibles were up as reports spread that the long-discussed merger with Sirius Satellite Radio Inc. was near.

Market watchers reported a solid, if unremarkable, flow to trading Friday. "There are names that traded one or two times, but it's not anything worth talking about," one said, adding that there were a lot of people calling about making deals if not necessarily consummating them.

One new deal hit the trading desks Friday morning. Penn Virginia Corp. brought an upsized $200 million in 4.5% convertible senior subordinated notes due Nov. 15, 2012 with an initial conversion premium of 40% Thursday after the market close. The deal came in at the rich end of talk, which had been for a coupon of 4.5% to 5% and an initial conversion premium of 35% to 40%. The deal was originally announced at $150 million.

The registered transaction has an upsized $30 million over-allotment option. The greenshoe was originally announced at $22.5 million. The settlement date is expected to be Dec. 5.

Plans for another new deal were announced early Friday morning. Canadian Solar Inc. plans to offer about $75 million in convertible senior notes due 2017, the company announced Friday.

The deal will also have an $11.25 million over-allotment option. The offering will be issued in the United States under Rule 144A.

No other details of the deal, including bookrunners, maturity of the notes, price talk and other terms, were available.

Canadian Solar is a Markham, Ont.-based solar power components producer. The company plans to use the proceeds for working capital, general corporate purposes and potential acquisitions.

Stocks had a meandering day Friday. Flush with Federal Reserve chairman Ben Bernanke's hint at a rate cut Dec. 11 Thursday night, the Dow Jones Industrial Average surged to a more than 150-point gain early. Then the index tuckered out.

The Nasdaq was down out of fear of what Dell's lackluster earnings report Thursday night meant for tech stocks.

All three major stock indices had difficult Novembers.

In the end, the Dow gained 59.99 points, or 0.45%, to close at 13,371.72. Even with the big gains on Tuesday and Wednesday, the Dow closed November down 4%.

The Nasdaq lost 7.17 points, or 0.27%, for a 2,660.96 close. For the month, the Nasdaq was down 6.9%.

The Standard & Poor's 500 posted an 11.42 point, or 0.78 point, gain Friday to close at 1,481.14. The S&P dropped 4.4% in November.

Penn Virginia opens higher

Radnor, Pa.-based oil and gas driller Penn Virginia priced its upsized $200 million in convertible senior subordinated notes due Nov. 15, 2012 on the aggressive end of talk. But talk itself was cheap in this case.

"It was cheap," an analyst said. "With the high-yield markets closed, I guess anyone coming into the converts market wants to make sure they get things done."

The convertibles came in cheap enough, closing their first day of trading at around 103.5 versus a closing stock price of $41.62.

Penn Virginia stock (NYSE: PVA) slipped 5 cents, or 0.12%, in trading Friday.

The convertibles have a conversion price of $57.75 per share and a conversion ratio of 17.3160.

There is a contingent conversion subject to a 130% hurdle until Sept. 15, 2012. The notes carry takeover and dividend protections and a net share settlement.

Penn Virginia also priced an upsized concurrent 3 million shares of common stock at $41.25 per share with an upsized 450,000 share greenshoe. The stock offering was originally announced at 2.2 million shares with a 330,000 share greenshoe.

Penn Virginia plans to use the proceeds of the convertible notes to pay down debt from its existing revolving credit facility and to pay for the convertible note hedge transactions. The proceeds from the common stock offering will go toward paying down debt on the revolver and for general corporate purposes.

Countrywide, Fannie Mae rise

Media reports say that the Federal government and mortgage lenders, including Calabasas, Calif.-based Countrywide, could reach an agreement on freezing low introductory rates on subprime mortgages for several years to save struggling homeowners from foreclosures. More than 2 million subprime mortgage holders are currently staring down foreclosures as interest rates on their mortgages are set to jump.

The deal, which may be announced as early as next week, would in theory give homeowners a few years at their low rate until they can afford to refinance their mortgages at fixed rates.

The talk helped Countrywide see solid gains in its stock and convertibles Friday.

Countrywide's Libor minus 350 bps series A convertible senior debentures due April 15, 2037 closed the day at 82.47 versus a closing stock price of $10.82. They closed Thursday at 79.68 versus a stock price of $9.30.

Countrywide's Libor minus 225 bps series B convertible senior debentures due May 15, 2037 closed Friday at 77.826 versus a stock price of $10.82 after finishing Thursday at 74.956 versus a stock price of $9.30.

Countrywide stock rocketed up $1.52, or 16.34%, on Friday.

Washington-based government secured mortgage backer Fannie Mae also had a solid day Friday.

Fannie's 5.375% series 2004-1 convertible perpetual preferred stock (NYSE: FNM-PI) moved up $1.98, or 5.33%, Friday to close at $39.15.

Fannie Mae stock (NYSE: FNM) jumped $6.03, or 18.62%, to $38.42 on the day.

Homebuilder convertibles mixed

Homebuilder stocks surged on word of the subprime deal. Their convertibles are another story.

Irvine, Calif.-based homebuilder Standard Pacific's 6% convertible subordinated notes due Oct. 1, 2012 closed Friday at 48.625 versus a stock price of $3.46. They closed Thursday at 42 versus a stock price of $2.90.

Standard Pacific (NYSE: SPF) stock gained 56 cents, or 19.31%, on the day.

Bonita Springs, Fla.-based WCI Communities' 4% convertible senior subordinated unsecured notes due Aug. 5, 2023 slipped to 68.28 versus a closing stock price of $3.36 Friday. They closed Thursday at 69.04 versus a stock price of $3.13.

WCI stock (NYSE: WCI) had a strong day, however, gaining 23 cents, or 7.35%.

E*Trade down again

E*Trade continued to move lower following Thursday's announcement that Citadel Investments Group would pump $2.55 billion into the struggling New York-based online financial institution.

E*Trade's 6.125% common equity units due Nov. 18, 2008 (Nasdaq: ETFCP) lost 22 cents, or 2.78%, to close at $7.69 Friday.

E*Trade common stock (Nasdaq: ETFC) fell a matching 22 cents, or 4.56%, for a $4.60 close Friday.

Intel, AMD down as tech worries grow

Computer-maker Dell posted worse-than-expected earnings Thursday after the markets closed. That led to a pullback in tech stocks and convertibles Friday as investors fretted over a fall in demand for consumer electronics. Slowing consumer spending in October reported Thursday by the Commerce Department didn't help matters.

The tech fall hurt semiconductor producers.

Santa Clara, Calif.-based Intel's 2.95% junior subordinated convertible notes due Dec. 15, 2035 closed Friday at 106.299 versus a closing stock price of $26.08. They closed Thursday at 107.152 versus a stock price of $26.34.

Intel stock (Nasdaq: INTC) fell 26 cents, or 0.99%, on the day.

Sunnyvale, Calif.-base Advanced Micro Devices' 5.75% convertible senior notes due Aug. 15, 2012 closed Friday at 88.01 versus a stock price of $9.76. They closed Thursday at 90.07 versus a stock price of $10.14.

AMD's 6% convertible senior notes due May 1, 2015 closed marginally lower at 79.445 versus a stock price of $9.76 after finishing Thursday at 79.54 versus a stock price of $10.14.

AMD stock (NYSE: AMD) fell 38 cents, or 3.75%, on the day.

XM up on merger chatter

A Bear Stearns analyst reported Friday that the long-discussed merger between Washington-based XM Satellite Radio and New York-based Sirius was "imminent."

That may or may not be the case, but stock in both companies shot up, and XM's convertibles posted gains as well.

XM's 1.75% convertible senior notes due Dec. 1, 2009 closed Friday at 89.67 versus a stock price of $15.60. They closed Thursday at 88.69 versus a stock price of $13.74.

XM stock (Nasdaq: XMSR) leaped $1.86, or 13.54%.

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