New deals higher, but volume slows as market begins to focus on weekend, holidays

By Ronda Fears

Nashville, Dec. 18 - The week looked pretty much over by Thursday afternoon as nothing popped up in the primary market for convertibles. Traders said volume trailed off around noon as many players turned their attention to holiday parties and the weekend.

"There could be something show up before the open on Friday, but no one really is expecting it now," said the head convertible trader at one of the bulge bracket firms.

"Volume in all the new issues, trading all around, died down pretty sharply this afternoon. It was a busy day, though, a busy week. By this afternoon, not much was happening, though."

Next week, the only firm deal is from Roper Industries Inc. The deal, which was anticipated for this week, has been delayed until Monday. Market sources don't expect anything else to emerge.

"We're not seeing anything coming the week of Christmas, no surprises anyway," said a capital markets source.

"Of course, you can never rule anything out if the market is open, right?"

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 company also is selling 3.955 million shares and negotiating a new $650 million senior secured bank facility. The stock closed Thursday up 3 cents, or 0.06%, to $49.73.

Outside of new paper just injected into the market, traders mentioned further activity in Yellow Roadway Corp. and Cypress Semiconductor Corp., both moving higher.

Cypress gained sharply on a boost to the company's forecast for financial results. The stock moved up $1.06, or 5.37%, to $20.80, and the 1.25% convertible due 2008 gained 5.5 points on the back of that to 149.625 bid.

Hanover Compressor Co. also saw positive reaction to its fairly painless settlement with the Securities and Exchange Commission over financials in 1999, 2000 and 2001, which will not result in any fines, penalties or additional restatements.

Credit rating agencies noted the resolution of the issue but did not move to make any changes to the ratings. Standard & Poor's expressed continued concern about leverage despite progress in that area from recent financing activities such as its new convertible.

The new Hanover Compressor 4.75% due 2014 gained 2.625 points to 108 bid, 108.25 offered. The stock rose 5 cents, or 4.9%, to $10.71.

Meanwhile, new paper deals from this week, totaling $1.1 billion, traded higher, but flow was considerably slower.

"All these looked busy all morning, but they barely traded this afternoon," said a convertible dealer.

Kroll Inc. was the latest entrant, selling $150 million of 10-year convertible notes to yield 1.75% with a 37.5% initial conversion premium. Following the pattern of other deals earlier in the week, it priced aggressively outside yield talk of 2.0% to 2.5% and at the aggressive end of premium guidance of 32.5% to 37.5%.

Goldman Sachs & Co., bookrunner on the Kroll deal, closed it at 102.25 bid, 102.75 offered. The stock added 15 cents on the day, up 0.59%, to 25.35.

Most other new issues from this week gained similarly, except for Mentor Corp. and Adaptec Inc.

Mentor's 2.75% issue rose 0.25 point to 105.25 bid, 105.75 offered, while the stock gained 56 cents, or 2.44%, to $24.53.

Adaptec Inc.'s new 0.75% convertible edged up 0.375 point to 101.375 bid, 101.875 offered, while the underlying shares ended 7 cents higher, up 0.83%, to $8.51.

Fleetwood Enterprises Inc.'s small $80 million deal was again the biggest mover. The 5% issue gained another 3 points to 115 bid, 116 offered. The underlying stock gained 23 cents, or 2.31%, to $10.19.

Agco's 1.75% issue gained 2.25 points to 108.875 bid, 109.375 offered, while the stock rose 70 cents, or 3.72%, to $19.50.

Interpublic Group of Cos. Inc.'s new 5.375% mandatory convertible rose 1 point to 55.625 bid, 55.75 offered. The underlying stock closed up 43 cents, or 2.94%, to $15.05. The New York advertising agency's new 4.5% convertible bond was closed at 143.5 bid, 144 offered.

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