Johnson Controls mixed on debut; Newmont adds; PNC wavers; FiberTower quiet ahead of earnings

By Rebecca Melvin

New York, March 11 - Johnson Controls Inc.'s new convertible bonds and mandatories were mixed on their first day of secondary market trading Wednesday, with the 6.5% bonds trading up to 101 before settling back to near par at the close, while the 11.5% mandatories slipped a bit, market sources said.

"The bonds [being] up and the mandatories down is certainly a reflection of a market that remains afraid of preferreds," a New York-based outright buysider said.

Given what happened in the Johnson Control's common stock, which came under pressure especially late in the session, it wasn't too big of a surprise, a syndicate source said.

In the secondary market, volume was relatively light, but the tone was better Wednesday, sources said.

"The JCI's were very active in the morning, but died in the afternoon," a New York-based sellsider said.

Newmont Mining Corp.'s convertibles, which priced Jan. 28, were also in trade in line with the underlying shares, which retraced Tuesday's drop when a rally in equities encouraged more risk appetite and people rotated out of miners.

Financials opened higher, with the convertible preferreds moving up a bit, but by the end of the day, most were off a bit.

Among financial names, the 4% bonds of PNC Financial Services Group Inc. bounced around a bit, with an early trade reported at 89.5 and subsequent trades at 91.

FiberTower Corp. was quiet ahead of the San Francisco-based wireless concern's fourth-quarter earnings report expected Thursday. The Fibertower 9% convertible senior secured notes due November 2012 were seen steady at 27 bid, 30 offered.

The convertible preferreds of Riverside, Calif.-based Fleetwood Enterprises Inc. were quiet at about $1 offered after the maker of recreational vehicles and manufactured housing and some subsidiaries filed for Chapter 11 bankruptcy in California on Tuesday.

More issuance soon?

If equity valuations continue to rise, and credit, which saw high yield weaken a bit last week, maintain the current trend, then the convertible market is likely to see more convertible bond new issuance, a syndicate source said.

"We should see some would-be issuers waiting on the sidelines more inclined toward convertibles, and we should see more convertible bond issuance, if the rally continues," the source said.

But what if equities don't continue to rise? The syndicate source said that there are a variety of catalysts to watch right now. For example, use of proceeds is an important factor.

If use of proceeds is for raising capital to strengthen liquidity, it will be less favorably viewed than if the use of proceeds is for acquisition financing or to retire debt, the syndicate source explained.

"There are going to be catalyst events" in this tough-sell environment, the source said.

Johnson Controls debut mixed

The Johnson Controls 6.5% bonds due September 2012 traded up to 101 versus a share price of $8.85, but the new paper was seen closing nearer to par versus a share price of $8.68.

Another source put the close at 100.375 bid, 100.875 offered versus a share price of $8.70.

The Johnson Controls 11.5% mandatory preferred shares, which improved somewhat through the session, were seen closing between 48.50 and 48.875 versus the $8.68 close on its share price.

Shares of the Milwaukee-based company gyrated a bit but ended lower by 14 cents, or 1.6%.

The new paper - of which there has been a dearth lately - traded actively, but one source complained that the issues had been placed in "very sloppy hands."

The supplier to both the automotive and commercial building sectors issued an upsized $750 million of mandatories and bonds late Tuesday.

The $350 million of bonds, which was upsized from $100 million due to strong demand, priced at the tight end of talk, and the $400 million of mandatories priced at the wide end.

Newmont adds with shares

Newmont convertibles added in line with their underlying shares.

Newmont's 3% convertibles due 2012 traded at 112 versus a share price of $36.30 Wednesday, which compared to 116 versus a share price of $42.35 exactly a month ago.

Newmont's series B 1.625% convertible senior notes due 2017 traded at 97 versus 109 a month ago. And the Newmont series A 1.5% convertibles traded at 106 compared to 112 a month ago.

Shares of the Denver-based gold and copper mining company have been volatile of late but have trended downward in the last month. On Wednesday shares bounced back 4.7% after slipping by about that much on Tuesday.

On Tuesday, with the return of some risk appetite, investors moved out of gold to less defensive positions.

Mentioned in this article:

FiberTower Corp. Nasdaq: FTWR

Newmont Mining Corp. NYSE: NEM

PNC Financial Service Group Inc. NYSE: PNC

Johnson Controls Inc. NYSE: JCI

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