'Sneak attack' from AMG; Morgans opens up; Ford drives on; Peabody, Biomarin lower

By Evan Weinberger

New York, Oct. 12 - In what was termed a "sneak attack deal" by one analyst, Affiliated Managers Group, Inc. came to market with a half a billion dollars worth of convertible trust preferred securities due 2037 Thursday after the market close.

Also on Friday, Morgans Hotel Group Co. and its upsized $150 million in senior subordinated convertible notes due 2014 had their first day of trading. iStar Financial Inc. held steady Friday, its second day on the market.

Continuing a surge were Ford Motor Co. convertibles. Web portal Yahoo! Inc.'s convertibles rallied as well, while Peabody Energy Corp. slipped. BioMarin Pharmaceutical Inc., on the other hand, tumbled.

AMG priced $500 million in 5.15% convertible trust preferred securities due Oct. 15, 2037 with an initial conversion premium of 52.94% Thursday after market close. There is no greenshoe.

The convertible securities have a $200 conversion price and a 0.25 conversion ratio.

There is call protection for the first five years. Beginning in year six and lasting through maturity, the convertible securities are callable subject to a 130% hurdle. There is a contingent payment subject to a 130% hurdle.

AMG is a Boston-based asset management firm. The company plans to use a portion of the proceeds to repurchase 2 million shares of its common stock. The rest will go toward general corporate purposes.

Morgans Hotel Group priced an upsized $150 million in senior subordinated convertible notes due Oct. 15, 2014 with a 2.375% coupon and a 22.5% initial conversion premium. The convertibles came in at the rich end of talk, which was a 2.25% to 2.75% coupon a 17.5% to 22.5% initial conversion premium. The deal was upsized from an originally announced $100 million.

The over-allotment option was upsized to $22.5 million from an originally announced $15 million.

The conversion price is $26.89 and the conversion ratio is 37.1903.

There is a contingent conversion subject to a 130% hurdle. There is call protection for the life of the convertibles and there are no puts.

Morgans is a New York-based boutique hotel chain. The company plans to use the proceeds to pay down in full its revolving credit facility, to enter into hedged and warrant transactions and for general corporate purposes. The warrants are intended to prevent the dilution of Morgans common stock and will raise the conversion price to around $40 per share, or a conversion premium of 82.23%.

Hong Kong-based Fu Ji Food and Catering Services Holdings Ltd. priced RMB 1.5 billion in Hong Kong dollar settled zero-coupon convertible bonds due Oct. 18, 2010 with an initial conversion premium of 31.24%

The convertibles have a conversion price of HK$32.85 and a fixed exchange rate of HK$1 equal to RMB 0.96893.

The convertibles are callable subject to a 130% hurdle beginning April 18, 2009.

Fu Ji is a Hong Kong-based restaurant operator with outlets throughout China. The company plans to use the proceeds to acquire a majority stake in Sky Charm Group Ltd., a holding company that operates the Golden Hans restaurant chain. A portion of the proceeds will go toward developing Fu Ji's railway catering operation and general corporate purposes.

Equity markets had a solid if unspectacular day Friday. Oracle Corp.'s play for BAE Systems Inc. boosted tech stocks and gave hope that merger and acquisition activity would pick up. Several earnings report came in better than expected, as did the government's retail sales report for September. Wholesale prices were up as food and energy prices rose, though.

The Dow Jones industrial average added 77.96 points, or 0.56%, to close at 14,093.08. The Nasdaq gained 33.48 points, or 1.21%, to close at 2,805.68 as tech stocks surged. The Standard & Poor's 500 closed at 1,561.80, a pickup of 7.39 points, or 0.48%.

New deals don't make much noise

In any other context, $500 million makes a lot of noise. Not so with AMG's newly-minted $500 million in 5.15% convertible trust preferreds.

The preferreds hit the market on Friday morning, and levels on them were nowhere to be found throughout the day. "I wonder if it was something that was all sort of placed right away, from the outset," one analyst said.

The 5.15% coupon and the 52.94% initial conversion premium were a tad "aggressive," he said. "It didn't sound like it was that terrific for a preferred," he said.

AMG stock (NYSE: AMG) added $4.15, or 3.17%, to close Friday at $134.92

Morgans Hotel's upsized $150 million in senior subordinated convertibles closed higher on their first day of trading. The convertibles went home at 102 versus a closing stock price of $21.70.

Morgans stock (Nasdaq: MHGC) dropped a quarter, or 1.14%, on the day.

Also of note, iStar's Libor plus 50 basis points convertible senior floating-rate notes due Oct. 1, 2012 stayed relatively flat Friday. They finished their second day of trading at 99.66 versus a closing stock price of $34.40. They closed Thursday at par versus $34.50.

Stock in the New York-based commercial REIT (NYSE: SFI) slipped a dime, or 0.29%, Friday.

Ford driving fast

Dearborn, Mich.-based Ford surged forward as the company's chief executive officer Alan Mulally expressed confidence that labor talks with the United Auto Workers will quickly result in a deal that will help the embattled auto maker. Those negotiations are expected to start soon. The UAW ratified its agreement with General Motors Corp. and completed negotiations with Chrysler following a six-hour strike Wednesday.

Ford's 4.25% convertible senior notes due Dec. 15, 2036 closed Friday at 123.5 versus a closing stock price of $9.20. It was the second consecutive big gain for Ford. They closed Thursday at 119.25 versus $8.76.

Ford stock (NYSE: F) gassed up 44 cents, or 5.02%, Friday.

Yahoo! lives up to its name

Oracle's play for BAE systems had a knock-on effect throughout the technology sector. Sunnyvale, Calif.-based internet company Yahoo! was no exception.

The company's zero-coupon convertible senior notes due April 1, 2008 rallied Friday, closing at 139.88 versus a closing stock price of $28.48. They finished trading Thrusday at 136.125 versus $27.65.

Yahoo! stock (Nasdaq: YHOO) jumped 83 cents, or an even 3%, Friday.

Peabody not cheering

Perhaps it makes sense that St. Louis-based coal miner Peabody Energy was down a bit on the day that Al Gore and the United Nations Intergovernmental Panel on Climate Change were awarded the Nobel Peace Prize for their work on global warming.

Peabody's 4.75% convertible junior subordinated debentures due Dec. 15, 2066 slipped to 109.75 versus a closing stock price of $51.22 Friday. The debentures finished Friday at 110.125 versus $51.41.

Peabody stock (NYSE: BTU) slipped 19 cents, or 0.37%, Friday.

BioMarin slides

Novato, Calif.-based biopharmaceutical firm BioMarin had a tough day on Wall Street. The company's 1.875% convertible senior subordinated notes due April 23, 2017 closed Friday at 145.065 versus a closing stock price of $26.51. They finished trading Thursday at 147.575 versus $26.91.

BioMarin stock (Nasdaq: BMRN) slid 40 cents, or 1.49%, Friday.

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