Kilroy Realty, TRW price deals after the close; CIT, Dollar Financial bid higher; Ford gains

By Rebecca Melvin

New York, Nov. 16 - Two new issues emerged in the convertibles market early Monday, and although the deals were set to price after the close, there wasn't much gray market activity in either name during the session, sources said.

Kilroy Realty LP had a plus one offer, according to one sellsider

Kilroy Realty priced $150 million of five-year exchangeables, which was heard to be two and a half times oversubscribed, and one analyst saw the deal as 5.7% cheap, using a credit spread of 625 basis points over Treasuries and 40% volatility.

TRW Automotive Inc. priced $225 million of six-year exchangeable senior notes after the close, and was quiet in the gray market during the session.

The secondary market was described as lackluster with light volume despite a rally in equities. Buyers of stocks lifted indexes to new highs for the year, amid a weaker dollar.

"The market has gotten ahead of itself. The only thing you can really say is that the rally is over-extended," a Connecticut-based sellside analyst said.

Heard in the market was CIT Group Inc.'s 7.75% convertible mandatories due 2015, or the Z paper, which was bid higher at 16.25, lifted along with better bid CIT debt in general.

The CIT mandatory preferreds become subordinated debt in a bankruptcy, a New York-based sellside trader pointed out.

Dollar Financial Corp. was also bid higher, gaining over 2 points on Monday amid strong buyers, according to a West Coast-based sellsider.

Car rental companies Hertz Global Holdings Inc. and Avis Budget Group Inc. changed hands during the session. The Hertz 5.25% convertibles due 2014 traded at 143.5 versus a share price of $10; and the Avis 3.5% convertibles due 2014 traded at 98.5 versus a share price of $10.80.

Ford Motor Co.'s new 4.25% convertibles due 2014 were higher, trading at 112.25 versus a share price of $8.75, compared to 108 versus a share price of $8.33 on Friday.

Kilroy at cheap end

The convertibles of Kilroy Realty LP, the operating partnership of Kilroy Realty Corp., were priced to yield 4.25% with an initial conversion premium of 17.5%.

They came to market at the cheap end of talk, which was 3.75% to 4.25% for the coupon with an initial conversion premium of 17.5% to 22.5%, according to market sources.

There is a $22.5 million greenshoe on the Rule 144A offering, which was sold via joint bookrunning managers JP Morgan and Bank of America Merrill Lynch.

The notes will be guaranteed by the Kilroy Realty Corp. on a senior unsecured basis. They will be non-callable for life with no puts. There is takeover and dividend protection.

The company planned to enter into capped call transactions to reduce dilution.

Proceeds are expected to be used to repay debt, for general corporate purposes and to purchase the call spread.

Los Angeles, Calif.-based Kilroy owns, operates, develops, and acquires suburban office and industrial real estate in suburban submarkets in southern California.

TRW quiet in gray

TRW Automotive was quiet in the gray ahead of final pricing, which came at a 3.5% coupon with a 35% initial conversion premium after the close.

The paper priced at the cheap end of talk for the coupon, which was 3% to 3.5%, and at the midpoint of 32.5% to 37.5% talk for the initial conversion premium.

The Rule 144A offering has a $33.75 million greenshoe.

The notes will be unconditionally guaranteed by TRW Automotive Holdings Corp.

JPMorgan, Bank of America Merrill Lynch, Deutsche Bank and Goldman Sachs are joint bookrunners, with Calyon, Nomura, Scotia and UBS acting as co-managers.

The exchangeables will be non-callable for four years until Dec. 6, 2013, and then provisionally callable for two years at a stock price hurdle of 135%. There are no puts, and the paper has takeover and dividend protection.

TRW intends to use about one-half of the net proceeds to repay borrowings under its existing term loan facilities, with remaining net proceeds for general corporate purposes, which may include additional repayment of debt.

Headquartered in Livonia, Mich., TRW is an automotive supplier with operations in 26 countries.

Dollar Financial bid up

Dollar Financial's 2.875% convertibles due 2027 were bid up to 92.75 on Monday, about 2 points higher than a price of 91 seen on Friday, according to a sellsider source.

They've "moved up nicely in the past couple of days," the sellside trader said.

"There are buyers out there, and it moved up disproportionately to the shares," a sellsider said.

Last week, Dollar said it was seeking an amendment and extension of the terms for its revolving credit facilities, and said it planned to sell $250 million of senior unsecured debt through a private placement. Shares of the Berwyn, Pa.-based retail financial services company jumped on Wednesday, but fell Thursday and Friday. On Monday, Dollar shares gained 74 cents, or 3.25%, to $23.51.

"I couldn't give [Dollar] away when it was 35, 40, 50. Now you can't find it at 92!" a New York-based sellside trader said, suggesting that Dollar should have bought back the debt when it was lower.

Mentioned in this article:

Avis Budget Group Inc. NYSE: CAR

CIT Group Inc. NYSE: CIT

Dollar Financial Corp. Nasdaq: DLLR

Ford Motor Co. NYSE: F

Hertz Global Holdings Inc. NYSE: HTZ

Kilroy Realty L.P. NYSE: KRC

TRW Automotive Inc. NYSE: TRW

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