AMR, Goodrich Petroleum gain on debuts; Gaylord Entertainment, PHH price upsized deals

By Rebecca Melvin

New York, Sept. 23 - Wednesday's convertibles market wasn't as brisk as one might have expected given a burst of primary market activity with six new deals: four on the calendar and two released for secondary dealings during the session.

"New issuance is appreciated; but it's not what's disappearing in our market. They are not super large issues, and people need investment grade," a New York-based sellside trader said, explaining why there wasn't more action.

Volume was down to about $1 billion of issues from $1.5 billion to $2 billion that the market has been seeing in recent days.

AMR Corp.'s newly priced 6.25% convertibles due 2014 traded up to as high as 109, with most trades wrapped around 107, in pretty swift action, according to a syndicate source.

The paper was said to be favored among hedge players, setting up nicely with good borrow and positive carry.

Goodrich Petroleum Corp.'s newly priced 5% convertibles due 2014 traded up to about 103 in less pronounced activity after the issue was upsized to $190 million and priced ahead of the market open.

Gaylord Entertainment Co., a known issuer to convertible investors, priced an upsized $300 million of five-year convertibles after the close.

PHH Corp., which launched a $200 million deal of five-year convertible senior notes early Wednesday, and is also a known convert issuer, priced an upsized $220 million of 4% convertibles after the close.

ATP Oil & Gas Corp. was expected to price $125 million of convertible perpetual preferred stock and a common stock offering also after the close.

ATP's common stock plunged $3.55, or 16%, during Wednesday's session.

Incyte Corp.'s $250 million of six-year convertible senior notes were expected to price Thursday after the close.

In secondary dealings, Eastman Kodak Co.'s new 7% convertibles due 2017 continued to trade in fairly good volume, well above par, after pricing late last week.

Nektar Therapeutics Inc. extended gains from earlier in the week. On Tuesday the San Carlos, Calif.-based biopharmaceutical company said its drug candidate NKTR-102 was effective in early studies as a treatment for ovarian cancer, and a mid-stage clinical trial has been started.

Lincare Holdings Inc., which provides home delivery of oxygen and other respiratory therapies, was in trade after its common stock rose Tuesday to a 52-week high in response to Citigroup placing the stock on a recommended list.

Ford Motor Co. convertible preferred shares were unchanged, moving up on the right delta with its common, as its credit improved, amid positive talk from management and from General Motors Corp. management about financial numbers going forward, according to a sellsider.

AMR top tick 109

AMR's newly priced 6.25% convertibles traded up to as high as 109, but mostly at 107, as its shares slid 66 cents, or nearly 8%, following the Fort Worth airline holding company's pricing of offerings of convertibles and stock. The company raised $800 million in new capital with the two deals.

Fitch Ratings assigned a C rating and a recovery rating of RR6 to AMR's $400 million of senior convertible notes.

The notes, which are guaranteed by American Airlines Inc., and the stock issue represent "an important step for AMR in supplementing its unrestricted liquidity position as the carrier continues to face very weak air travel demand patterns and the prospects of significantly negative free cash flow during the seasonally soft demand period through next spring," Fitch said.

Goodrich trades up to 103

Goodrich's newly priced 5% convertibles due 2014 traded as high as 103 while its common stock languished in the range of $25, which was down $1.50 or more, or nearly 6%.

Initially, the deal was talked at $150 million in size. The notes priced at the midpoint of talk, which was for a coupon of 4.75% to 5.25% with an initial conversion premium of 27.5% to 32.5%.

"We traded some small," a New York-based sellsider said, indicating that the trades were not large in size.

Another sellsider said, "We saw nothing in the bonds."

"People are looking for a few trades that they can make money on," the sellsider continued by way of explaining why Kodak and AMR remained higher.

Goodrich will use a portion of proceeds to repay its $75 million second-lien term loan and all amounts outstanding under its senior credit facility, with the remainder earmarked for general corporate purposes.

Houston-based Goodrich is an independent oil and gas company active primarily in east Texas and northwest Louisiana.

PHH prices $220 million

PHH priced an upsized $220 million of five-year convertible senior notes after the close Wednesday to yield 4% with an initial conversion premium of 30%, according to a news release.

The Rule 144A deal, which was initially going to be $200 million in size, priced at the rich end of talk for the coupon, which was 4% to 4.5%, and beyond the rich end of talk for the initial conversion premium, which was 20% to 25%.

There were hopes that it would be generate trade, given that PHH has an existing 4% convertible that investors may want to swap out of for the new one, which has a little longer maturity.

PHH's existing 4% convertibles due 2012 - issued only in March 2008, mature in just 2.5 years, and the new paper, seen pricing Wednesday, may be attractive to issuers that want to extend that maturity, a a sellsider said.

Mt. Laurel, N.J.-based PHH is an outsource provider of mortgage and vehicle fleet management services.

"The deals look attractive; maybe they'll trade," a sellsider said of the new issues expected to be priced after the close Wednesday.

A second sellsider said one account was playing the deal "but wasn't thrilled about it, and planned to flip it back to the underwriter."

Nektar adds to gains

Nektar's 3.25% due Sept. 28, 2012 traded up to 93 versus a share price of $10.50. That was up from 87.5 on Monday.

Shares of the biopharmaceutical company slipped during the session, ending down 8 cents, or 0.76%, at $10.39.

The company said that its oncology program, known at NKTR-102, demonstrated encouraging phase 1 and preclinical anti-tumor activity in ovarian cancer.

The company also announced a phase 2 study evaluating two dose regimens of single-agent NKTR-102 in patients with platinum-resistant ovarian cancer is ongoing.

On Monday the company and AstraZeneca plc announced a licensing deal in which AstraZeneca licensed NKTR-118 and NKTR-119 from Nektar and will take over both programs' development.

Kodak action continues

Kodak's recently priced 7% convertibles traded at 107 versus a share price of $5.25 early in the session.

The new Kodak convertibles, which priced late last week, are intended to take out the company's older 3.375% convertibles.

"The old bonds had been trading in huge size, but most of that has come to an end. There's no juice left," a New York-based sellside trader said. But the newer paper continues to trade fairly well, with the sellsider seeing an earlier market wrapped around 108 with the stock higher at $5.40.

With the ending stock price of $5.18, which was down 6% on the day, the sellsider saw the 7% convertibles closing out around 105ish.

"I may be biased in that I think the company is worth nothing except the name. But it made more sense to me when the bonds were trading around 70 rather than above par," the sellsider said.

Mentioned in this article:

AMR Corp. NYSE: AMR

ATP Oil & Gas Corp. Nasdaq: ATPG

Eastman Kodak Co. NYSE: EK

Incyte Corp. Nasdaq: INCY

Gaylord Entertainment Co. NYSE: GET

Goodrich Petroleum Corp. NYSE: GDP

Nektar Therapeutics Inc. Nasdaq: NTKR

Lincare Holdings Inc. Nasdaq: LNCR

PHH Corp. NYSE: PHH

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