Yahoo!'s new convertibles improve, in line from issue price; new American Residential adds

By Rebecca Melvin

New York, Nov. 22 - The convertible bond market quieted Friday following a busy week in the U.S. primary market in which 11 new U.S. deals priced for a total of nearly $3 billion in new paper. Performance in the aftermarket of these new deals was weaker than it has been in recent months, however.

Yahoo! Inc.'s new 0% convertibles improved on Friday after slipping on their debut in the secondary market Thursday. Compared to the issue price, the Sunnyvale, Calif.-based internet search, content and communications company's upsized $1.25 billion of five-year notes were "in line," a New York-based trader said.

Among new issues on Friday, American Residential Properties Inc.'s 3.25% exchangeable senior notes traded better at 101.5 bid, 102.5 offered early Friday after the Memphis, Tenn.-based heating, air conditioning, ventilation and plumbing services provider priced $100 million of the five-notes at the cheap end of talk late Thursday, a market source said.

American Residential shares were up about a nickel, or 0.3%, to $17.39 in the early going, but they slipped to end 6 cents lower by the close.

Also new to the convertibles market on Friday were Forestar Group Inc.'s $135 million of 6% tangible equity units, which priced at the midpoint of talked terms, and GAIN Capital Holdings Inc.'s upsized $70 million of 4.125% convertible senior notes, which priced at terms that were mixed compared to talk.

Those new convertibles were quiet in secondary market action. But shares of Forestar, an Austin, Texas-based real estate, mineral and fiber resources company, were up 54 cents, or 2.8% to $19.63; and shares of GAIN Capital, a Bedminster, N.J.-based trading services provider, were unchanged at $8.88 in the early going, and ended off by 2 cents.

Back in established issues, trading activity in the convertibles market was described as "dead" by several market players. Forestar Group's existing 3.75% convertibles due 2032 showed up on the Trace tape, changing hands at 108.875.

Also BioMarin Pharmaceutical Inc.'s dual tranches, including a 0.75% convertible due 2018 and a 1.5% convertible due 2020, which priced in early October, were seen in trade at 107.9 and 109, respectively, according to Trace data.

On Nov. 19, a panel of the Food and Drug Administration recommended that BioMarin's Vismizim for patients with a rare genetic disorder that causes skeletal malformation be approved for sale in the United States. That drug is up for a ruling by the FDA at the end of February. Getting one step closer to regulatory approval makes BioMarin more attractive to potential acquirers.

U.S. equities rose again. The Dow Jones industrial average added 54.78 points, or 0.3%, to 16,064.77; Standard & Poor's 500 stock index added 8.91 points, or 0.5% to 1,804.76, and the Nasdaq stock market gained 22.5 points, or 0.6% to 3,992.65.

It was the seventh straight week of gains for both the Dow and the S&P.

Yahoo! recoups some

Yahoo!'s 0% notes were seen late Friday at 100.375 bid, 100.6875 offered versus the closing share price of $36.49. That was up compared to 99 bid, 99.25 offered versus a share price of $35.62 on Thursday.

The new large deal was "a little better today," a trader said.

From issue, the new convertibles were "in line," he said.

Weaker initial performance for the new issue was in keeping with the trend this past week of new issues hovering around par or slipping after release for secondary dealings.

Yahoo! priced an upsized $1.25 billion of 0% convertible senior notes due Dec. 1, 2018 after the market closed on Wednesday.

The Rule 144A Yahoo! deal, which was increased from $1 billion, has a $187.5 million 30-day greenshoe.

Otherwise, trading was described as pretty quiet.

American Residential higher

American Residential's 3.25% convertibles due 2018 traded up to 101.5 bid, 102.5 offered early Friday with the underlying shares when the underlying shares were up about a nickel at $17.44.

Shares of the Memphis, Tenn.-based heating, air conditioning, ventilation and plumbing services provider ended flat, or down a penny, at $17.38.

A later market on the new issue was not heard.

The company priced $100 million of five-year exchangeable senior notes after the market close Thursday to yield 3.25% with an initial exchange premium of 22.5%.

The Rule 144A offering, which has a $15 million greenshoe, priced at the cheap end of talk, which was for a 2.75% to 3.25% coupon and a 22.5% to 27.5% initial exchange premium.

Bookrunners included Morgan Stanley & Co. LLC, BofA Merrill Lynch, Citigroup Global Markets Inc., Barclays and Jefferies LLC.

Proceeds are intended to repay amounts outstanding under the company's senior secured revolving credit facility.

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