New Ford trades actively near par; ADM flat after earnings news; MasTec, Jakks Pacific on tap

By Rebecca Melvin

New York, Nov. 4 - Ford Motor Co.'s newly priced 4.25% convertibles were the centerpiece of trading in the convertibles market on Wednesday after the Dearborn, Mich.-based automaker priced an upsized $2.5 billion of notes that were released for secondary dealings.

The Ford paper traded right around par for most of the day as its underlying shares slipped.

Elsewhere, Archer-Daniels-Midland Co. was in trade after the agribusiness company posted a weaker fiscal first-quarter profit that beat estimates. The bonds were flat as their underlying shares gained 30 cents, or less than 1%.

Convertibles players were also taking a look at two new deals that were launched late Tuesday and early Wednesday and expected to price after the close on Wednesday.

MasTec Inc., which launched late Wednesday, planned to price $100 million of five-year convertible senior notes to yield 4% to 4.5% with an initial conversion premium of 27.5% to 32.5%. That deal was not heard in the gray market during the session.

Jakks Pacific Inc., which launched early Wednesday, planned to price $85 million of five-year senior convertible notes to yield 4.5% with an initial conversion premium of 30% to 32.5%.

The Jakks deal was repriced during the session from original talk of a coupon of 4.25% to 4.75% and a premium of 25% to 30%. The Jakks deal was seen plus 2 bid in the gray market after repricing and ahead of final terms.

The new Jakks deal was also seen to be a lift to Jakks' existing 4.625% convertibles, which will be repurchased with proceeds from the new deal.

Trading breadth was narrow with Ford convertibles accounting for about half of all trades, with ADM and Vornado Realty Trust taking the No. 2 and No. 3 positions in trade volume, and Amgen and Medtronic making up the last two spots in the top five volume names, according to a West Coast-based sellsider.

"It's kind of been this way, and it's still in the middle of earnings season. I think Monday people were still marking book...and today Ford dominated," the sellsider said.

Convertibles players were also eyeing the Federal Open Market Committee, which said Wednesday afternoon that it will keep its benchmark Federal Funds interest rate unchanged at a 0% to 0.25% range and that it plans to keep the rate exceptionally low for an extended period. The decision was unanimous.

Even with Fed news that was bound to cheer investors, stock markets pared earlier gains. The Dow Jones Industrial Average ended up 30 points, or 0.3%, at 9,802.14, whittling an earlier 156-point gain; the S&P 500 index ended up 1 point, or 0.1%, at 1,046.50, after being up 15.59 points; and the Nasdaq Stock Market ended down 1.8 points, or 0.09%, at 2,055.52.

Ford trades actively

Ford's newly priced 4.25% convertibles due 2014 were seen near the end of the session at 99.25 bid, 99.75 offered, having traded as high as par and lower at 99.375 offered, according to sources.

Shares of the automaker eased, ending the day down 17 cents, or 2.3%, to $7.27, putting the bonds' performance on their debut in a better light.

The issue was upsized to $2.5 billion from a $2 billion issue and was priced with a coupon identical to its existing 4.25% convertibles due 2036.

The new convertibles were talked to yield 4% to 4.5% with an initial conversion premium of 22.5% to 27.5%.

The deal was seen being relegated to the major broker-dealer desks, leaving smaller firms sort of on the sidelines on Tuesday.

"To be perfectly frank, I didn't spend a lot of time on it. It's sort of relegated to the big desks. As of 3 p.m., a total of $1.1 billion of convertibles traded on the day, and $630 million of that is Ford," a sellsider said.

The size of the issue was seen as good for convertibles, but it's the bigger desks that are going to be able to commit a lot of capital to it and trade it back and forth.

The bigger desks include the likes of Wells Fargo, Morgan Stanley and Deutsche Bank, the sellsider said.

ADM trades flat

Archer-Daniels-Midland's 0.875% convertibles due 2014 traded at 104.5 versus a share price of $32.40 during the session, according to a New York-based sellside desk analyst.

The paper was seen closing at about 104.225 versus a share price of $32.21, which was called flat on the day.

On Tuesday, the Decatur, Ill.-based agribusiness company reported net earnings of $496 million, or 77 cents a share, for the quarter through Sept. 30, which was down compared with earnings of $1.05 billion, or $1.62 a share, a year earlier. Revenue fell 29% to $14.92 billion.

The company was hurt by lower demand, and analysts had been expecting earnings per share of only 57 cents.

Jakks Pacific seen plus 2 bid

The Jakks Pacific deal was said to have priced after the close and stood pat at the expected $85 million, but final terms weren't available by Prospect News' deadline.

Shares of the Malibu, Calif.-based toy and leisure products company skidded $2.13, or 15%, to $11.94 during the session after the convertibles deal was announced.

Proceeds, together with cash on hand, will be used to repurchase all or some of its 4.625% convertible senior notes due 2023. Those bonds were sold in June 2003 by Bear Stearns & Co. Inc. In the event Jakks is unable to repurchase such notes on satisfactory terms, Jakks may use proceeds for general corporate purposes.

The deal seemed to be a lift to the existing convertibles. Those bonds traded on Tuesday at par, a sellsider said.

"I talked to a couple of holders, and they were happy to see it," the sellsider said, noting that the existing 4.625% convertibles are putable in 2010 at par.

There is an over-allotment option for an additional $15 million of new Jakks notes, and Bank of America Merrill Lynch was the bookrunner of the offering.

Mentioned in this article:

Archer-Daniels-Midland Co. NYSE: AMD

Ford Motor Co. NYSE: F

Jakks Pacific Inc. Nasdaq: JAKK

MasTec Inc. NYSE: MTZ

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