Convertibles drag in quiet trade; AngloGold edges up; new Covanta flat; Hertz, Saks to price

By Rebecca Melvin

New York, May 19 - Despite two new issues released for secondary trading on Tuesday, convertibles were quiet and dragged a little, with many names treading water or a little weaker as equities succumbed to selling pressure late in the session after choppy trade, market sources said.

The newly priced AngloGold Ashanti Ltd. 3.5% convertibles, which were sold in the United States and Europe, traded a little higher at 101.625 bid, 102.375 offered, and even reached as high as 102 bid, 102.5 offered in the early going.

Covanta Holding Corp.'s newly priced 3.25% convertibles closed little changed at right around par.

Other recently priced new issues were active, and appeared mixed to lower. Cash America International Inc., which priced $100 million of 5.25% convertibles last Wednesday, saw its new deal up slightly, but lower on a dollar neutral basis.

D.R. Horton Inc.'s $500 million of 2% convertibles, priced on May 6, also weakened slightly on a relative basis, a New York-based sellside trader said.

"In general things looked a little weaker," a Connecticut-based sellsider said.

Auto names were pulled into trade after president Barack Obama unveiled new national rules designed to boost fuel efficiency and reduce greenhouse-gas emissions. General Motors Corp. convertible bonds were sharply lower, but Ford Motor Co. was stronger.

Medtronic Inc. convertibles, which until recently had been one of the more liquid names in the convertibles market, weren't heard in trade by sources despite the medical device maker reporting lower earnings and announcing up to 1,800 job cuts.

Penn Virginia Corp. was also quiet following the Radnor, Pa.-based oil and natural gas producer's registered underwritten public offering of 3.5 million shares of common shares.

After the close, two new issues emerged, including an $80 million offering of four-year convertibles from Saks Inc. and Hertz Global Holdings Inc.'s planned $250 million of five-year convertible notes.

AngloGold adds a little

AngloGold Ashanti Holdings Finance plc, a subsidiary of AngloGold Ashanti Ltd., priced an upsized $650 million of five-year convertibles after the close Monday to yield 3.5% with a 37.5% initial conversion premium.

The deal, which was originally sized at $575 million, priced at the aggressive end of talk, which was 3.5% to 4% for the coupon, with an initial conversion premium of 32.5% to 37.5% above the volume weighted average price of the ADSs as of May 18.

The newly priced AngloGold 3.5% convertibles traded actively on some desks, while other activity was reported in London. They traded up to 102 bid, 102.5 offered, and later were seen at 101.625 bid, 102.375 101.625 bid, according to a Connecticut-based sellside trader.

Barclays Capital and Morgan Stanley were joint bookrunning managers of the offering, with Standard Chartered Bank acting as lead manager.

Proceeds will be used to refinance AngloGold Ashanti's debt facilities and for general corporate purposes.

The bonds are non-callable for three years, and then provisionally callable subject to a 130% stock price trigger. The issuer can elect to settle in cash in certain circumstances.

The Regulation S and Rule 144A bonds of the Johannesburg-based gold producer will be convertible into American Depositary shares of AngloGold.

Covanta trades mostly flat

Covanta's newly priced 3.25% cash-settled convertibles were 100 bid, 100.25 offered at the close, and had traded at that level through the day, according to a syndicate source.

A second source said the upsized $400 million of convertible senior notes came in a bit after trading early on at 100 versus a share price of $15. Later in the session they were seen 99.75 bid, 100.125 offered versus $15.14.

Covanta's old 1% convertibles due 2027 were off a little at 84.5 bid, 85.25 offered versus a share price of $15.

Shares of the Fairfield, N.J.-based waste disposal, energy and specialty services company opened lower and pared losses toward the close to end little changed.

Initially the offering was expected to be $300 million in size.

The Rule 144A offering priced at the midpoint of talk, which was 3% to 3.5% with an initial conversion premium of 20% to 25%.

Barclays Capital, JP Morgan and Citigroup were joint bookrunners of the five-year bullet paper.

Proceeds will be for working capital and general corporate purposes, including possibly funding construction of a waste facility in Dublin, Ireland, other capital expenditures.

Under the strike price of the warrant transactions, the effective initial conversion premium to Covanta is 170%.

Recent issues mixed to lower

Cash America's 5.25% convertibles due 2029 were closed at 103.625, which was up slightly on an outright basis, but a little lower on a dollar neutral basis, according to a syndicate source.

Also active were Johnson Controls, Inc.'s 6.5% convertibles, which priced in March. They were seen at 180 versus a share price of $19.30, which was a little weaker on a dollar neutral basis; and Newell Rubbermaid's 5.5% convertibles due 2014, which traded at 144.5 versus a share price of $10.70.

Saks, Hertz to price

After the close Wednesday, Hertz launched a deal, expected to price after the close Wednesday, which was talked to yield 5.25% to 5.75% with an initial conversion premium of 22.5% to 27.5%.

There is a concurrent offering of about 40 million shares of common stock, with a greenshoe of an additional 6 million shares of stock.

Hertz intends to use the proceeds from the offerings to increase its liquidity and for general corporate purposes, including the repayment of consolidated debt.

Hertz is a Park Ridge, N.J.-based auto and equipment rental company

Saks said it plans to price $80 million of four-year convertibles in a Rule 144A offering.

Despite queries to various bookrunning sources, it couldn't be determined who was doing the deal, or when it will price, or what the talk was.

Saks is a New York-based retailer.

Mentioned in this article:

AngloGold Ashanti Ltd. NYSE ADS: AU

Cash America International Inc. NYSE: CSH

Covanta Holding Corp. NYSE: CVA

D.R. Horton Inc. NYSE: DHI

Ford Motor Co. NYSE: F

General Motors Corp. NYSE: GE

Johnson Controls, Inc. NYSE: JCI

Medtronic Inc. NYSE: MDT

Newell Rubbermaid NYSE: NWL

Penn Virginia Inc. NYSE: PVA

Saks Inc. NYSE: SKS

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