Ford, GM convertibles come under pressure as June sales fall

By Sara Rosenberg

New York, July 1 - Ford Motor Co. and General Motors Corp.'s convertibles traded around at lower levels as the two companies reported a decline in June sales compared to last year. Although the numbers were not necessarily unexpected, the news was enough to move the issues in an overall quiet market influenced by the upcoming holiday and typical summer doldrums.

Ford's convertible preferred closed at $53.35, down $1.41 or 2.57% with the level ranging from $53.18 to $54.96 during the day. The stock closed at $15.02, down $0.63 or 4.03%.

Ford's overall June sales were down 7.7% compared to June 2003 with 287,381 vehicles sold. Year-to-date through June, the company's sales were 1.7 million, down 3% compared with the same period a year ago.

Ford is a Dearborn, Mich. automotive and financial services company.

General Motors' 6.25% GPM convertible due 2033 closed at $28.65, down $0.39 or 1.34% and ranged from $28.312 to $29.15 throughout the day. The 5.25% GBM convertible due 2032 closed at $24.51, down $0.20 or 0.81% and ranged from $24.2327 to $24.76 throughout the day. While the company's stock closed at $45.48, down $1.11 or 2.38%.

General Motors' June sales were down 15% from the same period last year as the company sold 380,267 new cars and trucks. Total sales through June were up 1.0%.

"Coming off strong May sales, GM's June sales were weaker than we expected," said John Smith, group vice president North America Vehicle Sales, Service and Marketing, in a company news release. "For the first half of the year, our sales were up slightly, led by growing truck sales and launch vehicles. For the second half of the year, we need to accelerate our selling pace and produce stronger results."

GM is a Detroit, Mich. vehicle manufacturer.

CapitalSource right around par

CapitalSource Inc.'s new 3.5% convertible was quoted around par bid, par ½ offered pretty much throughout the day, according to a couple of market sources.

"Compared to a lot of new issues, this hasn't really been that active. And, considering it's $300 million, not one of those small $50 million deals, that's isn't really a bad thing. Not a ton of it has come back to the [bookrunner]," an analyst said.

"There was the usual after-issue stuff. Some people try to flip it. Some people want more than they were allocated," the analyst added.

Late in the day Wednesday, CapitalSource announced that it would be selling $300 million of convertible senior unsecured notes due 2034 under Rule 144A with proceeds earmarked for the repayment of outstanding indebtedness and for general corporate purposes.

"When it was first announced there were no indicative pricing terms on it," the analyst said. "Last night, well after close, pricing terms surfaced. No talk, just pricing. I believe it was oversubscribed. The fact that it sold without changing terms should be something of an indication."

The Chevy Chase, Md. commercial finance company's deal sold at par to yield 3.5% with a 30% initial conversion premium via lead manager Citigroup.

However, not everyone found the deal to be filled with all positives.

"I thought the pricing was good but they priced it last day of the quarter so that's a tough time to price a new deal," a trader said. "It's a new company. Only like a year and a half old. They refused to put anti-takeover language in the deal, which is really the standard now. It came into a bad market environment on a bad day.

"They just did a deal in March," the trader continued. "This one I guess is more attractive than the old one so the offer dropped. I saw people trying to sell it after the bell yesterday at 99. I don't think I saw the old ones at all today."

A $30 million greenshoe is available on the CapitalSource deal.

The convertible is non-callable for seven years with puts in year seven, 10, 15, 20 and 25.

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