iStar surges despite gloomy outlook; ADM up on food sales; CompuCredit crunched; Royal Gold glitters

By Evan Weinberger

New York, Nov. 6 - Convertibles issued by iStar Financial Corp. soared Tuesday despite the company lowering its earnings estimates for the year. Archer-Daniels-Midland Co. convertibles stretched on third-quarter earnings that beat Wall Street estimates.

One-time write-downs hurt Molson Coors Brewing Co.'s third-quarter earnings, along with its stock and convertibles.

CompuCredit Corp. convertibles got smashed, and Bristow Group Inc. surged on earnings.

Both Suntech Power Holdings Co. Ltd. and SunPower Corp. had strong trading days Tuesday, while NII Holdings Inc. were swamped on fears that the floods in southern Mexico would hurt the company's bottom line.

Ford Motor Co. convertibles continued to slide as the United Auto Workers officially set their voting date on the tentative labor agreement.

The news out of Citigroup continued to dominate the attention of many market watchers Tuesday as reports of even greater subprime write-downs emerged and the bank named a new manager for its subprime mortgage division.

That focus has stalled convertibles trading, one analyst said. "Everybody around me seems to be focused on the Citigroup thing," he said. The continued talk of increasing write-downs at Citigroup and other firms has many people spooked, he added. "Everybody's really kind of in the same boat here. All along, there's been this feeling that it's not over."

When asked if there was notable activity happening at his desk, one trader simply said, "Not really."

That didn't stop stock traders Tuesday. Stock markets rallied late as there was no bad news acting as an anchor and bargain hunters hit the trading floor. Also, surging commodities prices, including a new record close for crude oil, drove stocks in mining, energy and other raw material producers.

The Dow Jones Industrial Average piled on 117.54 points, or 0.87%, to close at 13,660.94.

The Nasdaq added 30 points, or 1.07%, for a 2,825.18 close.

The Standard & Poor's 500 closed at 1,520.27, a gain of 18.10, or 1.20%.

One new issue hit the street Tuesday. Royal Gold, Inc. priced $100 million in mandatory convertible preferred stock due Nov. 15, 2010 to yield 7.25% with an initial conversion premium of 20% Tuesday before the market open. The mandatories came in at the cheap end of dividend yield, which was talked at 6.75% to 7.25% and at the middle of initial conversion premium talk, which was 18% to 22%.

There is a $15 million over-allotment option on the registered transaction.

The mandatories are expected to be listed on the Nasdaq as RGLD P.

The threshold appreciation price for the mandatories is $35.29, and the conversion ratio is 2.8335.

The mandatories carry a provisional conversion until May 15, 2008. Royal Gold cannot convert the mandatories if it carries out an acquisition of $100 million or more.

There are takeover protections, a make-whole agreement and anti-dilution protections.

Royal Gold is a Denver-based precious metals royalties acquisitions and management company. Royal Gold plans to use the proceeds to acquire further precious metals royalty interests.

The mandatories opened strong, closing Tuesday at 102.75 versus a closing stock price of $30.77.

Royal Gold common stock (Nasdaq: RGLD) added $1.36, or 4.62%, on the day.

iStar surges despite forecast

New York-based iStar Financial raised its dividend 5% and announced a 19% rise in profits for the third quarter on Tuesday. That was the good news.

At the same time, the commercial real estate investment trust lowered its earnings outlook for 2007 to between $2.80 and $2.90. The original estimate had been $2.90 to $3.10. The lowered outlook was due to concerns over slowing net asset growth.

And yet, the stock and convertibles surged.

That caught analysts a little off guard. "When there's a strong statement of the future, that usually overshadows the last recent announcement," one analyst said.

He added that this was the most active trading day for iStar's Libor plus 50 bps convertible senior floating-rate notes due Oct. 1, 2012 since they hit the market in October.

The convertibles closed Tuesday at 95.7 versus a closing stock price of $29.54. They closed Monday at 88.67 versus a stock price of $27.03.

iStar stock (NYSE: SFI) leaped $2.51, or 9.29% on the day.

ADM powers forward

Rising corn prices due to the ethanol boom didn't put a dent into fiscal first-quarter earnings for Decatur, Ill.-based ADM.

In fact, the agriculture giant saw earnings rise to 68 cents per share for fiscal first-quarter 2007 over 61 cents per share for fiscal first-quarter 2006. The company's fiscal first quarter ended on Sept. 30. A Thomson Financial poll of analysts expected ADM's earnings to come in at 59 cents per share for the third quarter of 2007.

The gains were powered by growth in ADM's sweetener, starch, oilseed processing and grain marketing divisions. Higher commodities prices and food sales accounted for much of the increased earnings.

Those gains in turn powered ADM's stock and convertibles.

The company's 0.875% convertible senior notes due Feb. 15, 2014 closed at 104.8 versus a closing stock price of $36.89. They finished trading Monday at 100.54 versus a stock price of $34.52.

ADM stock (NYSE: ADM) was up $2.37, or 6.87%.

One-time items flatten Molson Coors

One-time write downs, including the closing of a Canadian brewery, drove down third-quarter net income for Montreal-based Molson Coors Brewing. The timing of Canada Day - Oct. 1 fell on a Monday - and bad weather in England hurt sales.

Third-quarter earnings fell to 74 cents per share for the third quarter of 2007 versus 78 cents per share for third-quarter 2006.

Those earnings hurt Molson Coors stock and convertibles Tuesday.

The brewer's 2.5% convertible senior notes due July 30, 2013 closed Tuesday at 121.13 versus a closing stock price of $55.24. They closed Monday at 123.09 versus a stock price of $56.58.

Molson Coors stock (NYSE: TAP) slipped $1.34, or 2.37%, on the day.

CompuCredit crunched

Atlanta-based credit card and financial services company CompuCredit saw a 13% drop in its third-quarter earnings, the company announced Monday after the market close. The loss for the quarter totaled $53.2 million, or $1.10 per share. CompuCredit posted earnings of $38.3 million, or 78 cents per share, in the third quarter of 2006.

Among the financial services CompuCredit provides is subprime lending.

Speaking of totaled, CompuCredit's stock and convertibles got hit hard Tuesday.

The company's 5.875% convertible senior notes due Nov. 30, 2035 closed Tuesday at 51.2059 versus a closing stock price of $14.04. They finished trading Monday at 60.1887 versus a stock price of $16.36.

CompuCredit's 3.625% convertible senior notes due May 30, 2025 closed Tuesday at 62.5223 versus a stock price of $14.04 after finishing Monday at 67.6063 versus a stock price of $16.36.

CompuCredit stock (Nasdaq: CCRT) was humbled, losing $2.32, or 14.18%.

Bristow takes off

Houston-based Bristow Group provides helicopters for offshore oil drilling rigs. The company's business took flight in the third quarter, as it posted a 21% gain over the same period in 2006.

Bristow said that along with increased revenue, strengthening foreign currencies helped increase earnings for the quarter.

For the third quarter of 2007, Bristow's net income rose to $34 million, or $1.12 per share, the company announced Monday after the market close. Net earnings stood at $19.1 million, or 76 cents per share, at the same point last year.

Bristow's 5.5% mandatory convertible preferred stock due Sept. 15, 2009 (NYSE: BRS-P) closed Tuesday at $71.07, a rise of $8.17, or 12.99%.

Bristow common stock (NYSE: BRS) added $7.45, or 15.14%, to close at $56.66.

Suntech, SunPower shine

Two solar energy companies shined bright in Tuesday trading. Bullishness on the solar sector helped to drive the convertibles.

Wuxi, China-based solar cell producer Suntech Power saw its 0.25% convertible senior notes due Feb. 15, 2012 closed Tuesday at 145.391 versus a closing stock price of $64.50. They closed Monday at 132.04 versus a stock price of $56.80.

The American Depositary Shares of Suntech (NYSE: STP) gained $7.70, or 13.56%, on the day.

Bigger gains were seen in San Jose, Calif.-based SunPower. The solar power components' producer saw its 0.75% convertible senior debentures due Aug. 1, 2027 close Tuesday at 183.11 versus a closing stock price of $149.56. They closed Monday at 164.13 versus a stock price of $129.23.

SunPower's 1.25% convertible senior notes due Feb. 15, 2027 closed Tuesday at 262.994 versus a stock price of $149.56. They closed Monday at 233.97 versus a stock price of $129.23.

Stock in SunPower (Nasdaq: SPWR) spurted $20.33, or 15.73%, on Tuesday.

Floods swamp NII Holdings

NII Holdings provides cellular telephone services, specifically Nextel services, to primarily the Latin American market. One area where the Reston, Va.-based company invested heavily is Mexico. Analysts fear that last week's devastating floods in Mexico's southern Tabasco state will cut into NII Holdings' profits.

That sent debt and equities issued by the company spiraling Tuesday.

NII Holdings' 2.75% convertible notes due Aug. 15, 2025 closed Tuesday at 128.84 versus a closing stock price of $53.36. They closed Monday at 136.515 versus a stock price of $57.03.

Stock in NII Holdings (Nasdaq: NIHD) tumbled $3.67, or 6.44%, on the day.

Ford slips on long-term concerns

The UAW agreed to vote Nov. 12 on the tentative contract it agreed to with Dearborn, Mich.-based Ford over the weekend. All signs point to the union agreeing to the contract. Part of the contract includes Ford pumping over $15 billion into an independent trust that will manage health care for the company's retirees. Pension and health care payments have been dragging down Ford's bottom line.

Concerns over the automaker's long-term health continued to hang over Ford after several news outlets reported that the company will have to reassess its strategies if sales don't improve.

Ford's 4.25% convertible senior notes due Dec. 15, 2036 closed Tuesday at 116.7 versus a closing stock price of $8.63. They finished trading Monday at 119.9 versus a stock price of $8.67.

Ford stock (NYSE: F) slipped 4 cents, or 0.46%, on Tuesday.

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