PMI jumps, slips back on debut; Lennar dips below par; Ford Motor lower; Synovus to price

By Rebecca Melvin

New York, April 27 - PMI Group Inc.'s newly priced 4.5% convertibles traded up strongly early Tuesday on their debut in the secondary market, reaching to as high as 109 bid, 109.5 offered before slipping back down in tandem with their underlying shares.

PMI, a residential mortgage insurer, priced an upsized $261 million of 10-year convertible senior notes at the tight end of revised talk late Monday.

"The market seems to like these financial bonds. There's been great demand for them, and I wouldn't be surprised if we see more of them," a Connecticut-based sellside trader said.

Lennar Corp.'s newly priced 2% convertibles - which priced on the cheap end of talk - slipped below par on their debut following initial trades at 100 bid, 100.5 offered. The Miami-based homebuilder and provider of financial services priced $250 million of 10.5-year convertible senior notes early Tuesday.

Also in the primary arena, Synovus Financial Corp. has launched an offering of $200 million of convertible tangible equity units that were seen pricing after the close of markets on Wednesday.

A couple of recently priced issues were also in trade Tuesday, including financial name MGIC Investment Corp., which saw its bonds price last week and trade Tuesday at 111.5 versus a share price of $10.60; and MGM Mirage's convertibles, which priced earlier this month and traded at 110 versus a share price a $16.00.

Elsewhere, Ford Motor Co. convertibles moved down along with lower underlying shares after the Dearborn, Mich.-based automaker reported better-than-expected quarterly earnings and raised guidance for the year, saying that it now expects to be profitable in 2010 instead of in 2011.

Nevertheless, investors took the opportunity to take profits amid concerns that the financials to which Ford's most-recent quarter was compared were weak and amid questions about how much more steam the company has regarding improved earnings and revenue going forward, a sellsider said.

Ford's newer 4.25% convertibles due 2016 traded at 160.25 versus a stock price of $13.55.

Goldman draws attention

Overall, the market was quieted by a hearing of Goldman Sachs personnel before the Senate Permanent Subcommittee of Investigations.

Testimony from Goldman trader Fabrice Tourre of the Goldman structured products group and Daniel Sparks, former head of the investment bank's mortgages department, among others, seemed to captivate Wall Street as the Goldman people answered questions about their involvement in the mortgage securities market before it collapsed in 2007.

Despite extensive questioning by the committee members, no real surprises have yet to come out of the hearing; and Goldman Sachs shares rose on the day.

"The whole Street is watching the inquisition," a New York-based sellside trader said.

PMI jumps early

PMI's newly priced 4.5% convertibles due 2020 jumped up in early trading to as high as 109 bid, 109.5 offered. One sellsider said he saw it trade at 108.75 versus a share price of $6.35 early on.

Later, however, as the shares came off, the paper traded lower at 101 versus a share price of $5.75, the same sellsider said.

Near the close, the new paper was seen at 102 bid, according to another sellside trader.

Shares of the Walnut Creek, Calif.-based company sank 85 cents, or 13%, to $5.61.

Ahead of final pricing late Monday, a sellsider said the paper looked to be around 8% cheap using Libor plus 800 basis points and 40% vol. at the midpoint of talk.

PMI priced an upsized $261 million of 10-year convertible senior notes to yield 4.5% with an initial conversion premium of 27.5%. The deal was upsized from $200 million.

The paper priced at the rich end of revised talk for the coupon, which was 4.5% to 5%, and at the point of revised talk for the premium. Original talk on the deal was for a yield of 5% to 5.5% and an initial conversion premium of 20% to 25%.

The deal has a $39 million over-allotment option, which was upsized from $30 million.

PMI priced a concurrent offering of about $478 million of common stock, or 77.8 million shares at $6.15 per share.

Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch were the joint bookrunners of both registered offerings, with Dowling & Partners Securities as the co-manager.

The convertibles are non-callable until April 15, 2015 and then provisionally callable at a 130% price trigger. There are no puts.

The notes have contingent conversion at a price trigger of 130%. Conversion settlement can be made in cash, stock or a combination.

The convertibles also have full dividend protection and change-of-control protection via a make-whole adjustment premium delivered upon conversion as incremental shares.

Lennar lags on debut

Lennar's newly priced 2% convertibles traded early at 100 bid, 100.5 offered. But later with the equities lower, the new bonds traded at 99.25 bid, 99.75 offered. Not much traded later in the session when pricing came off, however, a syndicate source said.

"It's very quiet this afternoon. People are watching Goldman Sachs on TV," the syndicate source said.

Lennar priced $250 million of 10.5-year convertible senior notes ahead of the market open Tuesday to yield 2% with an initial conversion premium of 37.5%.

The Rule 144A deal, which was originally expected to price after the close on Monday, priced at the cheap end of talk, which was for a coupon of 1.5% to 2% and an initial conversion premium of 37.5% to 42.5%.

The deal has a $37.5 million over-allotment option.

Lennar also offered $250 million of 6.95% senior straight notes due 2018.

Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. were the joint bookrunners of the convertibles offering, with Deutsche Bank Securities Inc. and UBS Securities the co-managers.

The convertibles are non-callable until Dec. 1, 2013. There are puts on Dec. 1, 2013 and on Dec. 1, 2015.

There is contingent interest, or 50 bps subject to a 120% threshold.

Conversion settlement can be made in stock.

About $200 million of the proceeds from the sale of the senior notes will be used to tender for Lennar's 5.125% senior notes due 2010, its 5.95% senior notes due 2011 and its 5.95% senior notes due 2013.

Remaining proceeds are for general corporate purposes, which may include repayment or repurchase of existing Lennar senior notes or other debt.

Synovus to price

Synovus, a Columbus, Ga.-based financial services holding company, planned to price $200 million of tangible equity units, with a par value of $25 per unit, after the close of markets on Wednesday.

The offering, which was talked to yield 8.25% to 8.75% with an initial conversion premium of 15% to 20%, is part of an initiative that the company believes will help align its capital structure with evolving regulatory standards and give the company a cushion if needed.

The other parts of the initiative include a public offering of $400 million of common stock and an exchange offer for its outstanding 5.125% subordinated notes due 2017.

Each tangible equity unit, or tMED, will be comprised of a prepaid stock purchase contract in respect of Synovus' common stock and a junior subordinated amortizing note.

JPMorgan will serve as the bookrunner of each of the offerings.

Mentioned in this article:

Ford Motor Co. NYSE: F

Lennar Corp. NYSE: LEN

MGIC Investment Corp. NYSE: MTG

MGM Mirage NYSE: MGM

PMI Group Inc. NYSE: PMI

Synovus Financial Corp. NYSE: SNV

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