All new deals soar, but small Fleetwood shines, rises to 112; Kroll adds $150 million overnighter

By Ronda Fears

Nashville, Dec. 17 - As the window of opportunity to raise capital is closing rapidly, Kroll Inc. tossed an overnighter into the mix, and market sources said there might be a deal pop up to price intra-day Thursday or at Friday's open.

Next week is looking dead, what with it being cut short by the Christmas holiday, except that a market source said the Roper Industries Inc. deal was going to be delayed until Monday. It was originally scheduled to price after Thursday's close.

Roper is pitching $150 million in proceeds of discount cash-to-zero convertible notes talked to yield 4.0% to 4.5%, up 27.5% to 32.5%. The Duluth, Ga.-based maker of specialty industrial controls also is selling 3.955 million shares and negotiating a new $650 million senior secured bank facility to finance the pending acquisition of Neptune Technology Group Holdings Inc. and to repay its existing credit facilities.

Merrill Lynch & Co. Inc., lead on the Roper offerings, did not confirm the delay.

Roper shares closed Wednesday up $1.36, or 2.81%, to $49.70.

Meanwhile, the new paper put into circulation Wednesday - five deals totaling $905 million - traded very actively and all were considerably north of par at the end of the day, even though all priced at the aggressive end of price talk, or aggressively outside of guidance.

Two were upsized, as well.

"We were busy in all the new issues; they were very active," said a convertible dealer.

For Thursday morning, the market will be looking for final terms on the Kroll deal. The 10-year convertible notes were talked to yield 2.0% to 2.5% with a 32.5% to 37.5% initial conversion premium.

Outside of new paper, market sources mentioned activity in Yellow Roadway Corp. and Best Buy Co. Inc., both moving sharply higher.

Conseco Inc.'s convertible preferred, an $860 million issue that sprang out of the insurance firm's bankruptcy, also was higher. The issue hit a new high of 25.9, although the stock was lower on the day, one source said.

The new Conseco convertible preferred was issued as part of Conseco Inc.'s emergence from bankruptcy in September. The payment-in-kind convertible preferred will pay 10.5% for two years, then bump up to 11%. The conversion ratio, however, has not been set. It will be based on a trading average for the stock over the next six months or so.

Conseco shares closed down 15 cents, or 0.873%, to $20.40.

Despite the secondary activity, new issues were the primary focus of the market.

Fleetwood Enterprises Inc.'s $80 million deal hit the high note among the new issues, despite its small size.

"It was clearly well received and placed well with both outright and hedged accounts," said a market source familiar with the Fleetwood offering.

The Riverside, Calif.-based manufactured housing and recreational vehicle sales company sold the 20-year convertible notes a day ahead of schedule. The 5%, up 27% convertible sold at the aggressive end of yield talk for a coupon of 5.0% to 5.5% and aggressively outside premium guidance of 20% to 24%. Proceeds were earmarked to repurchase a portion of its 6% and 9.5% convertible trust preferreds.

Sellside analysts put the Fleetwood convertible 8.615% cheap, at the midpoint of the guidance.

Lehman Brothers, bookrunner on the deal, closed the new Fleetwood convertible at 112 bid, 113 offered. The underlying stock gained 70 cents on the day, or 7.65%, to $9.96.

Interpublic Group of Cos. Inc. had the biggest deal of the day, a $325 million mandatory convertible, which sold at par of 50 to yield 5.375%, up 22% - aggressively outside yield talk for a dividend of 5.5% to 6.0% and at the aggressive end of premium guidance of 18% to 22%.

Interpublic, a New York-based advertising agency, also sold 22.4 million shares of common stock at $13.50 a share, fetching another $302.4 million.

The company said proceeds would be used to redeem its 1.8% convertible subordinated notes due 2004.

Sellside analysts had put Interpublic's new convertible around 4.5% cheap, at the midpoint of price talk.

Citigroup Global Markets, one of the lead managers on the new Interpublic offerings, closed it at 54.6 bid, 54.8 offered. The underlying stock gained 85 cents, or 6.17%, to $14.62.

Adaptec Inc. also returned to the convertible market and was well received, too.

The Milpitas, Calif.-based storage networking firm's deal was boosted to $200 million from $150 million. The collateralized 20-year convertible notes sold at par to yield 0.75%, up 40% - at the middle of price talk of 0.5% to 1.0%, up 37.5% to 42.5%.

Deutsche Bank Securities analysts put the new Adaptec convertible 1.43% cheap, at final terms, using a credit spread of 330 basis points over Libor and a 45% stock volatility.

Merrill Lynch, bookrunner on the deal, closed it at 101 bid, 101.5 offered. Adaptec shares closed up 8 cents, or 0.96%, to $8.44.

Coupon payments on the issue will be collateralized for five years, with U.S. Treasuries bought with proceeds from the offering. A portion of proceeds also are earmarked to limit the dilution impact of the convertible by hedging with the convertible bonds and warrants, the company said.

Adaptec said, however, that $125 million of proceeds will go toward repurchasing a portion of its 3% convertible notes due 2007.

Agco Corp. also bumped up its deal, to $175 million from $150 million, and priced the 30-year convertible notes at par to yield 1.75%, up 31% - at the aggressive end of price talk for a 1.75% coupon, up 23% to 31%.

The Duluth, Ga.-based agriculture equipment manufacturer said proceeds will help pay part of the purchase price for its previously announced €600 million acquisition of Valtra Corp., the tractor and off-road engine manufacturer unit of Kone Corp.

Sellside analysts had put the Agco convertible anywhere from about 1% cheap to nearly 3% rich, at the midpoint of the guidance.

Morgan Stanley & Co. Inc., bookrunner on the deal, closed it at 106.656 bid, 107.125 offered. The underlying stock ended up $1.78 on the day, or 10.13%, to $18.80.

Finally, Mentor Corp. sold $125 million of 20-year convertible notes at par to yield 2.75%, up 30% - at the aggressive end of yield guidance of 2.75% to 3.25%, up 25% to 30%.

Mentor used $35 million of proceeds, on a net basis, to enter convertible note hedge and warrant transactions and repurchase stock from investors buying the notes. The Santa Barbara, Calif.-based breast implant maker said would use the balance of proceeds for general corporate purposes, which may include additional repurchases of stock and acquisitions.

Credit Suisse First Boston, bookrunner on the deal, closed it at 105. Mentor shares closed up 44 cents, or 1.95%, to $22.97.

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