Concur trades below par on debut; Corporate Office quiet in the gray; Kulicke and Soffa up

By Rebecca Melvin

New York, March 31 - Concur Technologies Inc.'s newly priced 2.5% convertibles traded below par on their debut Wednesday amid weakness in the stock, although one sellsider said he saw the paper as high as 101. The $250 million deal priced at the midpoint of talk.

Corporate Office Properties Trust's planned $200 million of 20-year exchangeable bonds were quiet in the gray market ahead of pricing, which was expected after the close of markets on Wednesday.

"It was radio silent," a Connecticut-based sellsider said of the offering.

Trading overall in the convertibles market was light with pricing little changed. The end of the month and the end of quarter didn't contribute to any activity. In fact, it was the opposite, the sellsider said. Market participants seemed to settle down to mark their books and not do much trading at all.

"Things were kind of going sideways. People are reluctant to sell, and the new issues haven't been overly cheap, so people are rushing to sell anything to make room for the new paper," the sellsider said.

Among names that did change hands, Kulicke and Soffa Industries Inc.'s 0.875% convertibles due 2012 were in trade and "significantly higher" amid no particular news in the name.

Also trading were the convertibles of Gaylord Entertainment Co., which were higher on the day in tandem with their underlying shares.

Annaly Capital Management Inc. was also in trade again at 101 versus a share price of $17.20, but the paper not as actively traded as on Tuesday, according to a New York-based sellside trader.

In addition, convertibles players were said to be involved in the newly issued Ford Motor Co. warrants. Like convertibles, investors can go long the warrants and short the stock.

"I heard they looked cheap, and customers were interested in them," a Connecticut-based sellsider said of the large offering of Ford warrants.

Investors were rattled a bit by the ADP National Employment Report, which showed private industrial sector jobs were down another 23,000 in March, contrary to an expected increase of 40,000 jobs.

Equity markets were down. The Dow Jones Industrial Average lost 50.79 points, or 0.47%; the Nasdaq Stock Market lost 12.73 points, or 0.5%, to 2,397.96; and the S&P 500 index was off 3.84%, or 0.33%.

Concur slips below par

Concur's 2.5% convertibles traded as high as 101, according to a New York-based sellside desk analyst. But the paper also traded down at 99.375 versus a share price of $41.50 and at 99.625 and was seen late in the session at 99.75 bid, 100.25 offered.

Shares of the Redmond, Wash., provider of on-demand Employee Spend Management services fell to $41.01, which was down 87 cents, or 2.1%.

A syndicate source said that on a dollar-neutral basis the new deal did well.

But a trader said that the deal didn't do that well and "was kind of weak."

Concur priced $250 million of convertibles, as expected. The deal was not upsized, and pricing came at the midpoint of talk, which was for a 25% initial conversion premium. The company entered into warrant transactions that made the effective conversion premium from the company's perspective 75%.

The bonds are five-year bullets, with contingent conversion at a 130% price hurdle from day one of the bond's life.

There is an over-allotment option for up to an additional $37.5 million of notes that will probably get executed.

On Tuesday, the maker of expense reimbursement software was higher bid in the gray market by 100.5 bid, 102.5 offered.

Valuations showed the paper cheap. One New York-based sellsider said that using a credit spread of 450 basis points over Treasuries and a 28% vol., the paper modeled 2% cheap at the midpoint of talk.

A second sellsider said that using Treasuries plus 400 bps and a 30% vol., the paper looked to be worth 102.5 at the midpoint of talk.

Goldman Sachs & Co. and Deutsche Bank Securities Inc. were selling the Rule 144A deal.

Proceeds are earmarked for general corporate purposes, including potential acquisitions and strategic transactions, and to fund the cost of convertible note hedge and warrant transactions.

Corporate Office quiet

Corporate Office Properties Trust's $200 million of 20-year exchangeables that were expected to price after the market close were quiet in the gray market.

"People are sick of REITs," a sellsider said as a reason for the silence and referring to its sector as a real estate investment trust.

"It's also a holiday and going into a holiday, and that means not much is happening. Volume seems light," the sellsider said.

So far this year REITs have featured large in new issuance. This month, ProLogis priced $460 million of 3.25% convertibles and Health Care REIT priced $342.39 million of 3% convertibles.

In the beginning of the year, KKR Financial Holdings LLC priced $150 million of 7.5% convertibles.

The Corporate Office paper was talked to yield 3.5% to 4% with an initial conversion premium of 20% to 25% and was being marketed by RBC Capital Markets Corp. and J.P. Morgan Securities Inc.

There is an over-allotment option of up to an additional $40 million of notes, and proceeds were expected to be used for general corporate purposes, including potential repayment of borrowings under its unsecured revolving credit facility.

The exchangeables will be non-callable for five years, with investor puts in years five, 10 and 15. There is net share settlement upon exchange.

Columbia, Md.-based Corporate Office Properties is a real estate investment trust focused on the acquisition, development and management of suburban office properties.

Kulicke and Soffa rises

Kulicke and Soffa's 0.875% convertibles due 2012 traded to 92.25 bid, 92.75 offered, one sellsider reported, which was significantly higher than previous levels.

"I think there's more interest in the short term because it matures in two years," said the sellsider, who didn't think there was any particular news behind the activity.

Shares of Kulicke and Soffa, a Fort Washington, Pa.-based designer of semiconductor assembly equipment, ended down 2 cents at $7.25 on Wednesday.

The company priced an offering of $110 million of the 0.875% convertibles in May 2007 via Bank of America.

Mentioned in this article:

Annaly Capital Management Inc. NYSE: NLY

Concur Technologies Inc. NYSE: CNQR

Corporate Office Properties Trust NYSE: OFC

Ford Motor Co. NYSE: F

Gaylord Entertainment Co. NYSE: GET

Kulicke and Soffa Industries Inc. Nasdaq: KLIC

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