M&A buzz provides "shot in the arm"; American Tower gains 2.5 points on party in wireless sector

By Ronda Fears

Nashville, Feb. 17 - Convertible players were heavily involved in taking positions related to the merger and acquisition activity in the wireless sector and involved in considerable speculation in other groups such as cable, where Comcast Corp.'s flirtation with Walt Disney Co. was snubbed again.

There also has been some positioning in the financial group, traders said, although that sector is smaller in the convertible universe than telecom or cable. Mentioned higher on merger speculation in financials were E*Trade Group Inc. and Americredit Financial Corp.

"M&A has really been a shot in the arm for convertible flow," said a dealer.

Mergers also are expected to boost issuance, and after the close, Fisher Scientific International Inc. launched a $300 million deal with proceeds earmarked for two previously announced acquisitions.

Fisher's 20-year convertible notes - talked to yield 2.75% to 3.25% with a 47.5% to 52.5% initial conversion premium - will be marketed all day Wednesday with pricing after the close.

New paper continued to be a major focal point for convertible players, too, with the new Delta Air Lines Inc. and AMR Corp. issues gaining altitude, although Delta's credit rating took a hit late in the day from Moody's.

Elsewhere in the secondary, several energy names were mentioned. El Paso Corp. closed higher but then after the close announced a pretax charge of $1 billion related to the reserves writedown it warned of earlier this month. Calpine Corp.'s convertibles were up about 3 points ahead of the independent power producer selling some $1 billion in bonds later this week.

Wireless wedding party lively

M&A headlines grabbed players as the markets reopened after a long holiday weekend to news that AT&T Wireless Services Inc. had agreed to a union with Cingular Wireless. The union boosted virtually the entire pack of wireless issues as it removed one national competitor and represented a possible harbinger of further consolidation.

AT&T Wireless was the most heavily traded stock on the New York Stock Exchange after Cingular Wireless won the auction of the U.S. third-largest mobile phone operator with a $41 billion bid.

Sprint PCS, Vodafone and Verizon Communications saw a lot of activity in their stocks, but traders said the action did not spill over into the convertibles linked to those names as those issues are very illiquid or too deep in the money.

Nextel Communications Inc. and Nextel Partners inc., which markets Nextel cell phones, were sharply higher.

"People were really relieved that it was over and that Nextel was a winner in this situation," a trader said.

Nextel's 6% convertibles gained 5 points or better outright, the trader said. That issue was quoted closing at 126 bid, 126.5 offered with the stock ending up $1.66, or 6.12%, to $28.77.

Nextel Partners' two 1.5% convertibles were sharply higher as well.

Another name mentioned in context of the wireless sector, though not related to any M&A activity, was RealNetworks Inc., which announced that a number of European mobile operators are choosing its mobile platform as the foundation to launch new video and audio content services. RealNetworks' convertible was quoted up more than 8.5 points to 95.5 bid with the stock gaining $1.16, or 21%, to $6.63.

American Tower, which owns and operates satellite towers for wireless phone signals, was another winner. The new American Tower 3.25% convertible due 2010 added 2.5 points outright to 129.75 bid, 130 offered. American Tower shares closed up 29 cents, or 2.42%, to $12.29.

Cable romance buzz in bloom

As Disney spurned Comcast officially over the holiday, and as Comcast reportedly is not interested in wooing the media giant with a bigger bid, attentions again spread to other considerations for consolidation in the cable sector.

Charter Communications Inc. is a favorite as a target along with Adelphia Communications Inc., with Time Warner Inc.'s cable unit as the most likely suitor, traders said.

Charter's 4.75% and 5.75% convertibles were both about 0.5 point higher, traders said. The 4.75s were quoted at 92.5 bid, 93 offered and the 5.75s at 94.5 bid, 95 offered. Charter shares soared 34 cents, or 7.33%, to $4.98.

Convertibles linked to Time Warner or America Online Inc. also were a little better on the news, but traders noted that most of those issues are attached to other credits like Tribune Co. or CenterPoint Energy Corp. and others.

Disney's convertibles were still very active, despite the reports that Comcast would not pursue the media and entertainment giant with a higher bid.

"We were still seeing a lot of traffic in Disney," a dealer said.

"Comcast just opened a can of worms," the trader added, referring to speculation that other would-be suitors might step up to make a bid for Disney.

The Disney convertibles were very active, traders said, but little changed. The 2.125% issue was at 112.5 bid, 112.75 offered, while the underlying stock ended off 2 cents to $26.90.

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