Convertibles little moved amid holiday; Liberty Media, Ares flat; Resource Capital on tap

By Rebecca Melvin

New York, Oct. 14 - Convertible debt was mostly flat in quiet trade on Monday with bond markets closed in observance of the Columbus Day holiday and as equity markets took their cues from the status of talks in Washington to resolve spending and borrowing issues amid the ongoing government shutdown.

"It's quiet; that's about it," a New York-based convertibles trader said.

Liberty Media Corp.'s 1.375% convertibles were seen in trade at about the same level where they went out on Friday, which is when the $900 million of notes debuted in the market.

Ares Capital Corp.'s 5.75% convertibles were seen in trade amid a buyer in the market and they traded at about the middle of their previous level, a New York-based trader said.

Ares Capital's other existing convertible issues were not heard in trade, and given the amount of the 5.75% convertibles that changed hands it was not possible to identify trends for the company or for financials in general, the trader said.

Elsewhere, Allegheny Technologies Inc. showed up on the Trace tape after disappointing earnings guidance from the Pittsburgh-based specialty metals maker, which said sales for the third quarter will be lower than expected amid a restructuring of its engineered products segment.

"It's really quiet. What has traded is mostly clean-up stuff or just taking care of odds and ends," the trader said.

Equities reversed early sharp losses to end in positive territory as the government shutdown entered its third week. Senate majority leader Harry Reid, D-Nev., and Senate minority leader Mitch McConnell, R-Ken., said during the session that they had held constructive talks and were optimistic a reasonable agreement could be reached this week.

The S&P 500 stock index ended up 6.94 points, or 0.4%, to 1,710.14, the Dow Jones industrial average edged up 64.15 points, or 0.4% to 15,301.26, and the Nasdaq stock market added 23.4 points, or 0.6%, to 3,815.27.

After the markets closed, Resource Capital Corp. launched a $100 million deal of five-year convertibles via J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC that was seen pricing after the market close Tuesday.

Liberty Media steady

Liberty Media's 1.375% convertibles were seen in trade at 102 bid, 103 offered, which was in line with where the paper had traded on Friday.

Liberty shares edged higher during the session, ending higher by 43 cents, or 0.3%, at $149.66.

"Pricewise, the new LMCA issue price was close to 103, which is in line with where it had been," a trader said.

Of last week's new issues, Liberty was notable in that pricing was strong. The 1.375% liberty convertible came at the tight end of revised coupon talk.

Ares Capital unchanged

Ares Capital's 5.75% convertibles due 2016 were seen at 107 bid, 107.75 offered after the paper traded at 107.58.

The trades appeared to be on an outright basis, although this issue can trade on a 30% delta, a trader said.

Shares of the New York-based private equity firm were off slightly, closing down 6 cents, or 0.4%, to $17.28.

"They were lifted around midmarket," "a trader said of the convertibles, adding that one couldn't "take too much of a signal" from it given the day's volume and lack of investor focus.

In addition to the 5.75% convertibles, Ares Capital has existing 4.75% convertibles due 2018, 4.875% convertibles due 2017 and 5.125% convertibles due 2016.

Resource Capital to price

The New York-based specialty finance company Resource Capital focuses primarily on commercial real estate and commercial finance.

The company launched an offering of convertible senior notes after the market close that was seen pricing after the market close Tuesday to yield 5.75% to 6.25% and with an initial conversion premium of 10% to 15%.

The registered deal has a $15 million greenshoe and was being sold via joint bookrunning managers JPMorgan and Morgan Stanley.

The notes are non-callable for life with no puts. There is takeover and dividend protection.

Proceeds will be for general corporate purposes, including acquisition of investments, loan originations and working capital.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Ares Capital Corp. Nasdaq: ARCC

Liberty Media Corp Nasdaq: LMCA

Resource Capital Corp. NYSE: RSO

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