Ford convertibles regain some ground; Enzon active; Freeport-McMoRan adds; More supply ahead

By Rebecca Melvin

New York, Nov. 9 - Ford Motor Co.'s new convertibles strengthened Monday, regaining some ground after contracting several days last week. Its underlying shares also gained as the overall stock markets surged.

Enzon Pharmaceuticals Inc. convertibles were trading actively and were higher outright after the Bridgewater, N.J.-based biotech said that it is selling its specialty pharmaceutical business to an Italian company for $300 million upfront plus as much as $27 million for milestone payments.

Freeport-McMoRan Copper & Gold Inc. also regained some ground from recent levels as gold prices continued to climb and copper prices notched a gain amid surging strength in commodities in general.

SBA Communications Inc. was also mentioned in trade.

In the primary market, two new deals were launched after the close with pricing expected after the close of markets on Tuesday.

United Rentals Inc. plans to price $150 million of six-year convertible senior notes, which were talked to yield 4% to 4.5% with an initial conversion premium of 22.5% to 27.5%; and TeleCommunication Systems Inc. plans to price $90 million of five-year convertible senior notes, which were talked to yield 4.5% to 5% but with the same initial conversion premium of 22.5% to 27.5%.

Overall the convertibles market was flat to slightly higher on Monday, with trading breadth still very narrow, even as stock markets surged after word over the weekend that the Group of 20 countries will keep stimulus measures in place. Investors saw the agreement as a signal that interest rates would remain low.

Ford regains some ground

Ford's newly priced 4.25% convertibles due 2014 jumped about a point on a dollar neutral basis, and were trading at 106 versus a share price of $8.05, which compared to 101 bid, 101.75 offered versus a share price of $7.68 on Friday.

Shares of the Dearborn, Mich.-based automaker raced even higher, closing the day higher by 43 cents, or 5.6%, to $8.18 on Monday in heavy volume.

Last week, Ford shares gained 10.7% as investors remained upbeat on the name after a surprise billion-dollar third quarter.

Levels on the old Ford 4.25% convertibles due 2036 were nearly identical to those on the new Ford.

The paper, which contracted after pricing in the middle of last week, regained some strength but hasn't redeemed itself completely, a New York-based sellside trader said.

Enzon adds on asset sale

Enzon 4% convertibles due 2013 traded at 113 versus a share price of $9.40. That compared to a previous level of 109, according to a market source. Shares of the company pushed even higher toward the close of markets, ending the session up 85 cents, or 9.47%, to $9.83.

The company's stocks and bonds rose after the company said it plans to sell its specialty pharmaceutical business, a large part of its business, to Sigma-Tau Group, in order to focus on experimental cancer drugs.

In addition to the $300 million and the up to $27 million in royalty payments, Enzon will also receive royalties of 5% to 10% on incremental net sales above a 2009 baseline amount from Enzon's four marketed specialty pharmaceutical products through 2014.

Enzon's specialty pharmaceutical business includes four marketed products: Oncaspar, Adagen, DepoCyt, and Abelcet, as well as the manufacturing facility in Indianapolis, which will be purchased by a U.S. subsidiary of Sigma-Tau Pharmaceuticals Inc. (Maryland). Sigma-Tau Pharmaceuticals will distribute the products in the U.S. market.

After the sale of these assets, Enzon's businesses will consist of its royalties, Peg SN38 and its LNA and PEG technology platforms.

Goldman Sachs & Co. and Greenhill & Co. acted as financial advisers to Enzon.

Gold, copper prices boost Freeport-McMoRan

Freeport-McMoRan's 6.75% mandatory convertible preferreds due May 2010 traded at 118.5 versus a share price of $83.00, which was a bit better than 117.25 versus a stock price of $82.10 at the end of October.

Commodities climbed on Monday, with both gold and copper prices leading the rally. Gold for November delivery gained $5.70 to its highest-ever settlement at $1,100.80 an ounce on the Comex division of the New York Mercantile Exchange, its sixth consecutive gain. Gold has risen sharply since July, driven in part by the weaker U.S. dollar.

Copper prices rose Monday for the first time in three sessions, with futures for December delivery gaining 1.5 cents, or 0.5%, to $2.9675 a pound on the Comex division of the New York Mercantile Exchange.

United Rentals to price

United Rentals launched an offering of $150 million of convertibles talked to yield 4% to 4.5% with an initial conversion premium of 22.5% to 27.5%. The notes have a tenor of five years.

The offering is being done concurrently with $400 million of straight notes due 2019 in a separate registered public offering.

Bank of America Merrill Lynch, Morgan Stanley and Wells Fargo Securities are joint bookrunners for both offerings, with Bank of America acting as lead bookrunner of the convertibles deal. Co-managers are Barclays Capital, Calyon Securities (USA) and Scotia Capital.

The convertibles have contingent conversion at a price trigger of 130% and are non-callable for life. They also have dividend and takeover protection.

Proceeds from the convertibles offering, together with cash on hand, will be used to redeem a portion of United Rentals' 14% senior notes due 2014.

The company will use cash on hand to pay the cost of the convertible note hedge transactions that it intends to enter into in connection with the sale of the convertible senior notes.

United Rentals is a Greenwich, Conn.-based equipment rental company.

TeleCommunication Systems to price

TeleCommunication Systems also launched a deal after the close. It plans to price $90 million of five-year convertible senior notes talked to yield 4.5% to 5% with an initial conversion premium of 22.5% to 27.5%, according to a market source.

The Rule 144A offering has a greenshoe of $13.5 million.

Proceeds will be used for general corporate purposes, including investment in or acquisition of businesses, products and technologies that are complementary to its own. A portion of proceeds will also be used to pay the cost of convertible note hedge transactions that TeleCommunication Systems intends to enter into. It also plans to enter into warrant transactions.

Annapolis, Md.-based TeleCommunication Systems engineers and delivers wireless communications technology.

Mentioned in this article:

Enzon Pharmaceuticals Inc. Nasdaq: ENZN

Ford Motor Co. NYSE: F

Freeport-McMoRan Copper & Gold Inc. NYSE: FCX

SBA Communications Corp. Nasdaq: SBAC

TeleCommunication Systems Inc. Nasdaq: TSYS

United Rentals Inc. NYSE: URI

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