Newmont seen coming tight; Kendle, SonoSite active, CVRD moves higher again

By Evan Weinberger

New York, July 11 - New issues dominated Wednesday as investors jumped at new convertibles from Kendle International Inc., SonoSite, Inc. and Live Nation, Inc. All three of those priced late Tuesday night, after the market close.

Another deal that came up often in conversation Wednesday was Newmont Mining Corp.'s announced $1 billion of convertible senior notes that were unveiled late Tuesday and set to price Wednesday after the market close. A source close to the deal said that it would be pricing at the tight end.

In the secondary market, with visions of a stock market plunge dancing in their heads, investors looked to Companhia Vale do Rio Doce SA 5.5% mandatory exchangeable notes due 2010, Medtronic Inc.'s 1.5% convertible senior notes due April 15, 2011 and Mylan Laboratories Inc.'s 1.25% convertible senior notes due March 15, 2012.

Traders and analysts said that the markets were at an average level of activity Wednesday, especially on the new issues, and that the lack of action from last week finally seems behind the market. "It's been a pretty busy week," one sellside analyst said.

Activity appeared to pick up worldwide today, as three foreign issues announced final terms Wednesday.

The largest, and the one with the most moving parts, was Fortis' €200 billion in conditional capital exchangeable notes. The Brussels-based bank says that the exchangeable notes will change into an equal amount of mandatory convertible securities by Aug. 4, 2008, assuming that a rights issued linked to the takeover of ABN Amro goes through. Fortis plans to use proceeds from the issue to finance a portion of its share in a consortium trying to take over ABN Amro.

The exchangeable notes have a coupon of Euribor plus 15 basis points and are redeemable on Aug. 4, 2008, if the rights issue doesn't happen. If it does, the mandatory convertible securities will carry an 8.75% coupon and will reach maturity - and convert - three years after the conversion of the exchangeable notes.

Also in Europe, Recticel SA/NV priced €50 million in convertible bonds due July 23, 2017 with a 5% coupon and a 28% initial conversion premium. The Brussels-based maker of polyurethane foam used in bedding, insulation and other products plans to use the proceeds to repay outstanding debt.

And coming in from China, Pine Agritech Ltd., a soy producer based in Linyi City, priced a RMB 2 billion offering of zero-coupon convertible bonds due July 27, 2012. The bonds will yield 3.4% yield with an initial conversion premium of 51%. The company says it will use the proceeds to expand its production capacity and for general corporate purposes.

Newmont seen at the tight end

A source said late Wednesday that the Newmont Mining two-part $1 billion in convertible senior notes will come in at the aggressive end of price talk. The seven-year bonds were being talked at a coupon of 1.25% to 1.75% with an initial conversion premium anywhere from 10% to 15%. The 10-year bonds were being talked at a coupon of 1.625% to 1.125% with an initial conversion premium of 10% to 15%.

Traders and analysts throughout the day Wednesday referred to the bonds as seeming cheap.

However, even with the issue size, some might not jump at the Denver-based mining company's convertible. The biggest issue seemed to be coupon size.

"Newmont, I can't get excited about 1½% coupons," one trader remarked. He added that with no put "it's not for me."

The trader had modeled out the seven-year notes at 103.03 fair value, or roughly 3% cheap, and the 10-year bonds he modeled at 105.17, or roughly 5% cheap.

Newmont Mining stock (NYSE: NEM) traded down $1.01, or 2.45%, with a close of $40.18.

Kendle gets moving early

Kendle's $175 million in convertible senior notes due July 15, 2012, was thought to be the most attractive of the day's three new issues. That attraction allowed an upsizing of the convertibles from an announced $150 million.

With a 3.375% coupon and a 32.5% conversion premium, the convertibles ended up pricing at almost exactly at the mid-range of talk, which had a coupon of 3.125% to 3.625% and an initial conversion premium of 30% to 35%.

"I heard that people were playing them," one sellside analyst said of Kendle's convertibles as well as SonoSite's new issues.

The Kendle convertibles, which were offered at par, finished the day at 100.9963 versus a closing stock price of $35.61.

Kendle stock (Nasdaq: KNDL) finished up $0.50, or 1.39%. The rise in the share price of the Cincinnati-based clinical research organization that provides clinical research services to the biopharmaceutical industry went along with a general move up in the equity markets. The Dow Jones Industrial Average finished up 76.17 points, or 0.56%, at 13,577.87. The Nasdaq composite rose 12.63 points, or 0.48%, at 2,651.79.

SonoSite seen higher

Investors also looked favorably upon SonoSite's newly priced $200 million in convertible senior notes due 2014. The issue was upsized from an announced $150 million. It came in with a 3.75% coupon and an initial conversion premium of 22%.

That was at the more expensive end of coupon talk, which was pegged between 3.625% and 4.125%, and at the middle of conversion premium talk of 19% to 24%.

One sellside analyst said he saw "a lot of flow" on SonoSite's bonds. At last look they were up around 101 versus a the closing stock price of $30.76.

The stock price didn't match the excitement of the convertibles. Shares of SonoSite (Nasdaq: SONO), a Bothell, Wash.-based ultrasound machine maker, closed down $0.55, or 1.76%.

Live Nation goes live

Live Nation also priced its convertibles. The Los Angeles-based concert promoter and music venue manager priced $200 million in convertible senior notes due 2027 at a 2.875% coupon with a 27.5% conversion premium.

The convertibles came in at the mid range of talk, which had been for a coupon of 2.625% to 3.125% with an initial conversion premium of 24% to 30%.

Looking for a safe harbor

Much like Tuesday, when investors looking for good credit seemed to gravitate towards health care, mining convertibles got a good look Wednesday.

One sellside analyst said investors may be looking to get into mining, especially their convertibles.

CVRD's 5.5% mandatory due 2010 (NYSE: RIO-P) were up $1.09, or 2.68%, to $41.69 versus a closing stock price of $49.37 for CVRD common stock. The CVRD common (NYSE: RIO) was also up $1.50, or 3.13%.

Health care and medical products were also attractive Wednesday, with Medtronic's 1.25% convertible senior notes due April 15, 2011, finishing Wednesday at 105.85 versus a closing stock price of $52.87. They finished Tuesday at 104.75 versus a stock price of $52.62. Common stock in the Minneapolis-based medical device manufacturer (NYSE: MDT) was up $0.25, or 0.48%.

Mylan Laboratories' 1.25% convertible senior notes due March 15, 2012, were also up, finishing Wednesday at 95.1675 versus a closing stock price of $17.73. They were last seen Tuesday at 95 versus a closing stock price of $17.75. The Canonsburg, Pa.-based generic drug maker saw its stock price (NYSE: MYL) close down $0.02, or 0.11%.

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