Kendle International, American Mortgage, SonoSite launch deals; Huntsman higher; Ford issue off

By Evan Weinberger

New York, July 9 - Two new issues emerged for pricing in the coming days as Kendle International Inc. and SonoSite, Inc. put an exclamation point on the end of what traders and analysts called a slow day on the secondary market.

American Mortgage Acceptance Co. also announced a tiny $42 million in series A cumulative convertible preferred shares, although there was no announcement of a pricing date. The New York-based real estate investment trust said proceeds will go to acquire additional mortgage-related assets.

With the market world coming back from what turned out to be pretty much a week off last week, traders took the chance to fill in their June books and investors to reassess where they stand.

"People are kind of fine tuning their positions, but no big stories so far," one sellside analyst said. "It doesn't look like anybody's taking any big new positions or exiting any positions."

But one trader did say that he saw action picking up. "It's a little busier," he said. "We're seeing some markets around."

With the July earnings season starting Monday and an interest rate announcement from the Federal Reserve set for Tuesday, it appeared that all parties may have been biding their time a bit.

"It looks like some moderate credit widening, people waiting for [Fed chairman Ben] Bernanke tomorrow," a buyside source said. "But people are waiting to see where the bond market really is."

The coming new issues gave credence to the sellside analyst's hope that new issues would provide the jolt the secondary markets need to get going again.

"Hopefully we'll get some new issuance pickup after the expected lack of issuance from last week," the analyst said. "People are active out there, so I expect to see some flow as the week goes on."

One sellside trader did say in an e-mail that there was no guarantee that new offerings would necessarily lead to a spike in trading.

"Perhaps the deal calendar will build and create some excitement in the space because vol seems to be gone for now," he said. "Also [I] hope the brokers price them to move otherwise you're just looking at bad supply into the market...we'll see."

On that sunny note for the primary market, trading in the secondary market was slow Monday, as even issues that have been strong in recent weeks were unable to generate much activity.

When asked how the market was moving, one sellside trader said: "I have no idea, because there is none."

CVRD issue rocks up lightly

Companhia Vale do Rio Doce SA's (CVRD) 5.5% convertible mandatory exchangeable notes due 2010 traded up, but at a lower volume than normal. The mining company's mandatories (NYSE: RIO-P) were up $0.57, or 1.4%, to $41.19 Monday. But the issues traded at a volume of 2,041,700. The three-month average volume was 3,500,820.

Still, with Alcoa Inc. announcing smaller-than-expected profits for the second quarter but extending a $28.6 billion offer for Canadian aluminum producer Alcan Inc., the mining sector is remaining square in the eyes of convertibles traders. "Mining, it's hot," one buyside analyst said.

Shares in Rio de Janeiro-based CVRD common stock were up $0.55, or 1.15%, to $48.58.

Overall, stock markets were up Monday. The Dow Jones Industrial Average closed up 38.29 points, or 0.28%, at 13,649.97, just short of a new record. The Nasdaq also closed strong, finishing up 3.51 points, or 0.13%, at 2,670.02.

Kendle launches $150 million

Kendle International, a Cincinnati-based based clinical research organization that provides clinical development services to the biopharmaceutical industry, announced that it would price $150 million in convertible senior notes Tuesday after market close.

There is a $22.5 million over-allotment option.

The convertibles are being talked at a coupon of 3.125%-3.625% with an initial conversion premium of 30% to 35%.

The company plans to use most the proceeds from its convertibles to pay down a term loan. The rest will go towards entering into convertible note hedge transactions and general corporate purposes.

SonoSite on tap for Tuesday

SonoSite, a Bothell, Wash.-based maker of ultrasound systems, announced an offering of $150 million convertible senior notes.

The deal is being talked at 3.625% to 4.125% coupon with an initial conversion premium of 19% to 24%.

There is a $22.5 million over-allotment option and the deal is set to price Tuesday after market close.

The company plans to use the proceeds for acquisitions of complementary businesses or product lines; some also is earmarked for call spread transactions to limit dilution.

Any net proceeds not used for acquisitions will be used for general corporate purposes. A portion may be used to enter into convertible hedge note transactions.

Fleetwood could disappoint

With earnings season upon us, traders and analysts are analyzing which companies are going to do well and which are going to disappoint. Take for example a discussion of Fleetwood Enterprises Inc. The Riverside, Calif.-based recreational vehicle and manufactured housing maker announced that it would hold a conference call Thursday to discuss its year-end earnings. The company's fiscal year ended April 29.

Even though an official announcement of the earnings isn't out, one trader was estimating $0.38 per share loss for the stock, among other gloomy statistics. To the trader, it gets worse.

"Higher rates, higher fuel prices further causing them pain," he wrote in an e-mail. There has been "no hurricane to prop sales, stock [is] at a recent high, [it's] not a steady cash flow company, [and is] poorly managed."

The company has a put coming next year on its 5% convertible senior subordinated notes due Dec. 15, 2023, "plus their pain in the rear 6% conv[ertible] pref[erred]s."

For the trader, this means only one thing: "Makes me say short this/sell this here."

Fleetwood stock ended the day up $0.02, or 0.21%, at $9.54. Its 5% convertibles haven't traded since last Tuesday, July 3. They were last seen at 105.625 versus a closing stock price last Tuesday of $9.66.

Huntsman issue bid up

Huntsman Corp.'s 5% convertible mandatory preferred due 2008 continued its steady march up Monday. The mandatories (NYSE: HUN-P) closed up $0.18, or 0.35%, at $50.95. After a strong week on news of a bidding war, the news continued to get better for holders of the Huntsman mandatories.

Hexion Specialty Chemicals, a portfolio company of private equity firm Apollo Management Ltd. upped last week's bid for the Salt Lake City-based chemical manufacturer by $0.75 per share Monday, to $28 per share. That takes Hexion's bid to a total of $6.5 billion. Hexion is in a bidding war with Dutch chemical producer Basell Polyolefins Co., which had bid $5.6 billion for Huntsman.

Apollo's Hexion offered up what was considered a pre-emptive higher bid, topping its own bid of $27.25 last week to best a $25.25 per share bid by Basell Holdings, which is controlled by U.S. industrial group Access Industries - which is controlled by Russian-born billionaire Len Blavatnik.

Huntsman stock (NYSE: HUN) finished Monday up $0.07, or 0/25%, at $28.07.

Ford convertible slips

Meanwhile, Ford Motor Co.'s 6.5% convertible trust preferred securities due Jan. 15, 2032 (NYSE: F-PS) finished down $0.06, or 0.15%, at $39.77 after Lehman Brothers advised outright convertibles investors to sell on the $5 billion offering while advising risk-arb investors to sit tight until July 31.

The Dearborn, Mich.-based auto giant announced July 2 a tender offer for the $5 billion mandatories, which was issued in 2002. The deadline to accept the offer is July 31.

Ford stock (NYSE: F) finished down $0.03, or 0.33%, at $9.08.

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