Emdeon to price $300 million deal; Charter gyrates but closes higher; Willbros gains

By Rebecca Melvin

Princeton, N.J., Aug. 24 - Convertibles players got wind of a new deal from Emdeon Corp. late Wednesday that was expected to price ahead of the bell Thursday.

A reoffered price on the Elmwood, N.J.-based company's $300 million 3.125% convertibles is expected to be in the range of 97.75% to 98.25%.

Also on Wednesday, the convertibles of Charter Communications Inc. bounced around with its stock, while Willbros Group Inc. rose. The moves of each were spurred by company-specific, debt-related news.

RF Micro Devices Inc. retraced some gains achieved early in the session after its underlying stock was upgraded; and Northwest Airlines Corp. slipped as its stock fell amid a new record high for the price of crude oil and its continuing mechanics strike.

Late in the day, Moody's Investors Service cut the debt of General Motors Corp. and Ford Motor Co. to junk status. But GM's $25 convertible bonds had already closed higher on the day, as had its stock. Ford's convertible preferred shares ended lower however.

Emdeon deal to be reoffered

Emdeon, formerly WebMD Corp., was expected to price $300 million of convertibles at par to yield 3.125%, with an initial conversion premium of 35%.

There is a $45 million greenshoe.

Bookrunner for the Rule 144A overnight deal is Citigroup, which will pinpoint the reoffered price early Thursday.

"Looks like a tough sell," a New York-based buysider said via e-mail of the new convertible.

The 20-year senior unsecured notes are callable after five years and have puts in years seven, 10 and 15.

The health care information and business solutions provider was renamed Emdeon this month to avoid confusion with the WebMD Health subsidiary, which will trade separately on the Nasdaq following an initial public offering.

Proceeds of the Emdeon deal are for general corporate purposes.

Charter convertibles rise

The convertibles of Charter Communications dropped about 4 points early in the session but then climbed 8 points after the St. Louis-based broadband communications supplier said that it would exchange $8.4 billion principal amount of debt for new notes.

The move is aimed at improving Charter Holdings' financial flexibility by extending debt maturities and reducing debt.

Convertibles players viewed the plan as "credit positive." The company is offering to exchange outstanding notes for $3.53 billion of new notes due in 2015 and $4.26 billion of new notes due in 2014 and 2015.

It affects convertibles "in that it gives the company more breathing room with regard to having to pay back the debt [through] pushed out maturities," said a New York-based sellside desk analyst.

The cable TV and internet services provider would make the new notes senior to the old ones, providing an incentive to investors to exchange because they would be better protected in the event of bankruptcy.

Charter's 5.875% convertibles due 2009 traded Wednesday down 4 points to 77 and then were seen at 79, versus a stock price of $1.46.

Later in the session, the bonds bounced back past opening levels in the low 80s to 85, versus a stock price of $1.65.

"It's following the stock around," commented a sellside trader in New York.

Charter shares closed up 47 cents, or 41%, at $1.62.

On Tuesday, at Charter's annual shareholders meeting in Seattle, Paul Allen, chairman of the board and controlling shareholder of Charter, reinforced his commitment to the company and the cable industry, emphasizing the superiority of cable over satellite connectivity to the home.

"I'm confident we have the personnel, the infrastructure, the products and the services necessary to be the premier provider of in-home entertainment and communications services," Allen, who is co-founder of Microsoft Corp., said.

Standard & Poor's, however, placed Charter's CCC+ corporate credit and CCC- senior unsecured debt due 2009 to 2012 on CreditWatch with negative implications.

The rating agency said the exchange transactions will reduce onerous maturity pressure on Charter but the completion of any of exchanges will be viewed as tantamount to a default on the original issue terms because of the discount to par and the maturity extensions.

Willbros rises

Willbros Group saw its convertibles rise a point or two after news that the Houston-based independent contractor in oil, gas and power industries reached an agreement with holder Whitebox Advisors, LLC to prepare a consent solicitation.

The Aug. 19 agreement was reached to prepare a consent solicitation statement to amend the terms of the indenture on its 2.75% convertible senior notes due 2024.

Whitebox, which owns $17.6 million or 25.1% of the notes, sent a notice of default on June 10 as a result of the company's failure to file its 2004 form 10-K and quarterly report on form 10-Q for the quarter ended March 31.

There are two key aspects of the consent solicitation, which is expected to take about nine months to complete once initiated in September. The first is that the first call on the issue would be pushed out by two years to March 15, 2013 from March 15, 2011. The second is that it would add a make-whole provision in the event of "fundamental change" such as a takeover, said Willbros investor relations manager Michael Collier.

"The make-whole provision kicks in if 10% of the purchase price is in cash," Collier said.

A third aspect of the solicitation is that Whitebox will stand down on any activity related to the notice of default while the consent solicitation is underway, he added.

Willbros' 2.75% convertible traded at 98 on Wednesday, up from a recent level of 95 bid, 96 offered, a sellside trader said.

Northwest Airlines declines

The convertibles of Northwest Airlines declined a little, but trading activity was very thin, as its stock fell 6.7%.

Investors were said to be skittish regarding the whole airline sector as crude oil jumped to another record high amid supply concerns.

In addition, Northwest saw its shares drop on reports that the five-day old strike of its mechanics union was slowing service and prompting some flight cancellations.

Concerns a storm brewing could disrupt Gulf of Mexico output sent crude oil futures in New York to a $67.32 a barrel close, a 2.5% jump, and signaled higher fuel prices for the airlines.

Northwest's 6.625% convertible traded at 48 bid, 49 offered. Its 7.625% convertible traded at 41 and was seen at 40 bid, 41 offered at the session's close. Shares closed down 37 cents, or 6.7%, to $5.16.

RF Micro retraces some gains

The 1.5% convertible of RF Micro Devices lost 1 point intraday to trade at 101 after earlier trades at 102 bid, 102.50 offered.

The climb came after Lehman Brothers upgraded the shares of the wireless equipment provider to "overweight" from "equal-weight," citing market share strength at the two largest customers of the company, Nokia Corp. and Motorola Inc.

Shares of the Greensboro, N.C.-based company ended 47 cents, or 8%, higher at $6.65.

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