Goldcorp, MasTec trade under par on debuts; JetBlue, Biovail, Steel Dynamics notes to price

By Rebecca Melvin

New York, June 2 - Goldcorp Inc. and MasTec Inc., which successfully priced convertible bonds late Monday, saw their paper released for secondary market trading Tuesday. And both issues were met with tepid enthusiasm.

Goldcorp's $750 million of five-year notes were under par early on in trading, but their higher stock price helped buoy the name; meanwhile, MasTec was mostly in the 99.5 bid, 100 offered range on their first day of secondary dealings, although some traded lower also, sources said.

After the market close, three new deals were launched, which were all expected to price post market close on Wednesday.

The deals were all modest in size, including a $150 million registered offering from JetBlue Airways Corp.; $200 million of five-year paper in a Rule 144A deal from Toronto-based Biovail Corp.; and $150 million of five-year paper from Steel Dynamics Inc.

Elsewhere, recently priced Allegheny Technologies Inc. gained in trade. The Pittsburgh-based diversified specialty metals producer priced an upsized issue last Wednesday, and its stock has jumped 25% since then.

Transocean Inc., which has been actively traded of late, saw its series a tranche of convertibles trade at 94.5 versus a share price of $83.45 on Tuesday.

Among financials, Bank of America Corp., which has been regaining ground from a plunge two weeks ago, gained another 1.5 point on Tuesday.

Goldcorp, MasTec trade under par

In contrast to the stellar first-day dealings that new convertible issuance was enjoying in late March, April and May, the two new issues in play on Tuesday were lackluster.

Goldcorp priced a large issue of $750 million of convertible senior notes to yield 2% with an initial conversion premium of 30%, which was the cheap end of talk.

The Vancouver, B.C.-based producer of gold, silver, copper, lead and zinc was an unknown entity to the convertibles market, but the size and sector appealed.

But sources said that if hadn't been for the company's stock move on Tuesday, which added $1.99, or 5.4%, to $38.90, the deal would have flopped.

"When I see 2s, up 30, I run. Historically, they don't do so well," a New York-based sellside trader said.

The new MasTec 4% convertibles priced with a 30% premium. The $100 million deal priced at the midpoint of talk.

The MasTec stock dropped 9%, and that hurt the deal. All things considered, the stock stayed in a very tight range, and the new notes mostly changed hands in the 99.5 bid, 100 offered context.

"Seems pretty active and firm. Goldcorp stock moving higher helped that deal. I can't say the same for MasTec," a sellsider said.

B of A extends gains

Bank of America's 7.25% convertible perpetual preferred shares added again on Tuesday to trade at 772. About two weeks ago the preferreds traded about 100 points lower in the 660 range.

The Charlotte, N.C., bank has exchanged a billion dollars of preferred shares and said Tuesday that is it is very close to being at or over its capital target.

It said it has raised almost $33 billion toward the $33.9 billion capital buffer identified by the Federal Reserve's Supervisory Capital Assessment Program and now believes it will comfortably exceed that number.

Wells Fargo & Co. preferred shares traded in the 771 to 776 context and were a little more active than they have been.

Stocks were flat to down on Tuesday, with the amount of equity being brought to market, but "it's being digested without an issue," a sellsider said.

Since its meltdown two weeks ago, when reportedly a "huge hedge fund" was selling Bank of America indiscriminately, the series L convertible preferred shares are up 10 points, the sellsider said.

A change in outlook is helping the financials. "Rationality it coming back," the sellsider said, describing the move in convertibles as "steadily streaming up."

"I couldn't give them away for half the price before," the sellsider said of Wells Fargo, which was 776 at the end of the day.

The key, he thought, was that the banks are going to be paying back TARP funds and extracting themselves from the government's influence.

Among other convertible names, Fifth Third was a little weaker and KeyCorp was down a little at 61 bid, 62, offered during the session, but it ended at 63.60, the sellsider said.

Primary calendar builds

JetBlue launched a registered offering of $150 million of 30-year convertibles, which will be priced in two tranches of $75 million each.

The tranches were talked with identical terms for a yield 6.25% to 6.75% and an initial conversion premium of 15% to 20%.

JetBlue, the New York-based low-cost airline, also plans to price a concurrent offering of 20 million shares of common stock.

Repurchase or redemption schedules are different for the two tranches. Tranche A is non-callable for five years, with investor puts in years 2014, 2019, 2024, 2029 and 2034. Tranche B is non-callable for seven years, with investor puts in years 2016, 2021, 2026, 2031 and 2036.

Morgan Stanley & Co. Inc. is the bookrunner for both offerings, with Goldman Sachs & Co. and J.P. Morgan Securities Inc. acting as co-managers for the debenture offering.

Proceeds are earmarked for general corporate purposes.

Biovail launches

Biovail launched a $200 million offering of five-year convertible senior notes to yield 5.25% to 5.75% with an initial conversion premium of 20% to 25%.

The Rule 144A is being sold via JPMorgan.

The notes will be non-callable for three years and will be provisionally callable thereafter at a price hurdle of 130%.

Steel Dynamics on tap

Likewise, Steel Dynamics plans to price $150 million of five-year convertibles that will be non-callable for three years and subsequently callable subject to a 130% price hurdle.

Proceeds of Biovail's deal will be for working capital and general corporate purposes, which may include funding its operations, development and in-licensing arrangements, capital expenditures and acquisitions.

The Biovail offering of the notes and listing of its underlying stock on the Toronto Stock Exchange are subject to TSX acceptance and approval.

Biovail is a specialty pharmaceutical company.

Talk on Steel Dynamics was for a yield of 5.125% to 5.625% with an initial conversion premium of 22.5% to 27.5%.

Steel Dynamics also plans to price 27 million shares of common stock.

Merrill Lynch, Goldman Sachs, Morgan Stanley and JPMorgan are serving as joint bookrunners for both registered offerings.

ABN Amro Inc. and PNC Capital Markets LLC are serving as co-managers for the convertible senior notes.

Proceeds will be used to repay term loan borrowings under a senior secured credit facility.

Steel Dynamics is a Fort Wayne, Ind.-based maker of steel products.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Bank of America Corp. NYSE: BAC

Goldcorp Inc. NYSE: GG

JetBlue Airways Corp. Nasdaq: JBLU

MasTec Inc. NYSE: MTZ

Steel Dynamics Inc. Nasdaq: STLD

Transocean Inc. NYSE: RIG

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