Forestar to price $100 million deal; Newmont steady to down; Host little moved on partial call

By Rebecca Melvin

New York, May 31 - The first session of the week after the long holiday weekend for Memorial Day was pretty quiet, convertibles market participants said.

Prices in the secondary market were steady to higher given that equity markets moved upward.

No new issuance was seen during Tuesday's session but after the market close a deal materialized from Forestar (USA) Real Estate Group Inc., a subsidiary of Forestar Group Inc., which launched dual offerings of seven-year convertible notes for $100 million and eight-year senior straight notes for $150 million.

Price talk on the Rule 144A Forestar convertibles wasn't available since the deal isn't expected to price until June 8, according to a syndicate source.

Forestar is an Austin, Texas-based real estate and natural resources company.

Back among established issues, Newmont Mining Corp.'s 1.625% convertibles were very actively traded, and seen flat to lower as the underlying shares of the Denver-based gold and copper miner dipped lower intraday, then retraced losses to end in positive territory.

Host Hotels & Resorts Inc., the Bethesda, Maryland-based hotel oriented real estate investment trust, announced a partial call of its 3.25% exchangeable bonds. Although the call came as something of a surprise to the market, sources said, the bonds weren't actively traded and were little changed because they had been trading close to parity prior to the announcement.

In an odd move, Teva Pharmaceutical Industries Ltd. reversed a previously announced call of its 0.5% series A convertibles due 2024 and 0.25% series B convertibles due 2024. But market sources said there was so little outstanding of that paper, just $3 million and $11 million, of the As and Bs, respectively, that it wasn't a notable event.

It was just not a very notable day overall, a New York-based sellside trader said. Even General Motors Co.'s mandatory convertibles, which are listed on the New York Stock Exchange, were thinly traded with little more than a quarter of a million of bonds changing hands, he said.

Economic data, of which there will be plenty this coming week, was disappointing. A weaker-than-expected S&P/Case-Shiller 20-city Composite Index showed home prices fell 3.6% in March to a multi-year low. That compared with expectations of a 3.4% slide, and a 3.33% decline for the previous month.

The Chicago PMI that came in at 56.6, missing its 62.5 expectations, and Consumer Confidence slipped to 60.8 from 66.0 last.

On Wednesday, the ADP Employment Change figure will be viewed as a precursor to Friday's monthly Employment Report for May. There will also be May ISM and Construction Spending data Wednesday, with April factor orders and productivity data on Thursday. ISM Services data is due on Friday.

Host Hotels little changed

HST 3.25% convertibles due 2024 were seen at about 117.56 bid, which was seen as about parity and up slightly from Friday's level.

On Friday, the 3.25% convertibles were at 116.25 versus a share price of $17.30, which represented about 3.2 points of premium, a New York-based sellside desk analyst said.

The bonds were not actively traded on Tuesday although there may have been a couple of small swap trades, a New York-based sellside trader said.

Host, a Bethesda, Md.-based hotel-oriented real estate investment trust, gave notice that it intends to redeem $150 million of the $325 million outstanding principal amount of its 3.25% exchangeables on June 27.

Under the terms of the exchangeable debentures, the redemption price will be 100% of the principal amount together with accrued and unpaid interest.

The current exchange price is 65.5744 shares of Host REIT common stock per $1,000 principal amount of debentures, which is equivalent to an exchange price of $15.25 per share.

"The call is worth mentioning...and surprising that it took as long as it did," a New York-based sellside trader said, adding that he surmised that the company was taking advantage of a spike in the stock last week that followed an upgrade by Goldman Sachs.

Although less than half of the issue is being called, the entire issue will trade as though a call is imminent.

Mentioned in this article:

Forestar Group Inc. NYSE: FOR

General Motors Co. NYSE: GM

Host Hotels & Resorts Inc. NYSE: HST

Newmont Mining Corp. NYSE: NEM

Teva Pharmaceutical Industries Ltd. Nasdaq: TEVA

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