AIG extends gains; selling weighs on Hologic; Virgin Media steady; JA Solar up 2 points hedged on debut

By Rebecca Melvin

New York, May 14 - The convertible bond market was quieter Wednesday, but still striking a more favorable, albeit name-specific, tone that has been evident in the last handful of sessions, market players said.

"It's safe to say that for the first time in a long time, investor risk is broadening, and people are more willing to invest in bonds that are particularly cheap. There's less short selling and more buying, more willingness to trade," a New York-based sellside trader said.

"The tone is brighter than it has been for at least a couple of months," the trader said.

American International Group Inc.'s 8.5% mandatories, which debuted on Tuesday, gained further ground on Wednesday, trading at 79 compared to 77, on a better share price.

"AIG continued to take up a lot of time," a West Coast-based sellsider said, characterizing the overall convertibles market as "quiet across the board."

AIG priced a mega issue of $5.4 billion three-year mandatory convertibles on Tuesday.

Selling pressure hit Hologic Inc. again on Wednesday, amid no particular news, as a downward slide of nearly a month continued to plague the shares and bonds of the Bedford, Mass.-based medical technologies company.

Moving in the opposite direction was Virgin Media Inc., which was steady Wednesday at 106 versus a share price of $14, compared to a month ago when the paper traded at 99, versus a share price of $12.625

In the primary arena, China's JA Solar Holdings Co. Ltd. priced an upsized $350 million of five-year senior convertible notes to yield 4.5%, and the bonds traded up to 104.5 bid, 105.5 offered, versus a better stock, according to a syndicate source.

After the close, ShengdaTech Inc., also of China, announced that it plans to price $100 million of 10-year convertibles. The deal is seen pricing on May 21.

AIG extends gains

AIG's 8.5% mandatory equity units due 2011 traded up to 79 versus a share price of $39.5 intraday. And the new convertibles were indicated at a 78.6 close, versus a $39.44 closing price, compared to a close of 77 versus a share price of $38.40 on Tuesday.

The units have a par value of $75.

Shares of the New York-based insurance and financial services giant (NYSE: AIG) added 28 cents, or 0.72%.

The offering Tuesday was part of a package of capital raising moves announced last week when the company posted a first-quarter loss due to large losses on credit default swap contracts.

The issue is defying a recent trend in which new issues have tended to trade weaker initially upon release to the secondary market.

Standard & Poor's on Tuesday assigned its A junior subordinated debt rating to the insurance company's equity units. But at the same time, S&P placed the rating on CreditWatch with negative implications because all other AIG ratings are on CreditWatch.

S&P added that the A rating is two notches below the AA- counterparty credit rating on AIG, which reflects the subordinated nature of the securities and the risk of deferral of interest payments as well as the market risk borne by investors under the share purchase contract

Hologic dips again on selling

The 2% convertibles of Hologic dropped in trade to 84.5 versus a share price of $21.25 on Wednesday, compared to about 87 versus a share price of $22.125 on Monday.

"We cleaned up a big seller in the name. They are now gone, and there's better buyers," a New York-based sellside trader said, adding that his shop traded about 75 million of the bonds.

Hologic bonds have been under pressure in recent weeks. On May 1, the company reported disappointing earnings and provided lukewarm guidance for the next quarter and fiscal year.

Nevertheless, the company which concentrates on women's health diagnostics and surgical products is a fairly strong credit, sources say.

On Wednesday, Hologic shares (Nasdaq: HOLX) shed 33 cents, or 1.5%, in heavy trading to close at $21.25.

Virgin Media steady at 106

A month ago, shortly after Virgin Media priced $1 billion of eight-year convertible senior notes, to yield 6.5%, the paper was at 99 versus a share price of $12.625. Since then the paper has edged up and stabilized in the last several sessions at 106.

New York-based Virgin is a U.K. cable and mobile phone company. Its shares (Nasdaq: VMED) closed Wednesday at $13.96, up eight cents, or 0.58%, from a day earlier.

JA Solar jumps delta neutral

The new JA Solar 4.5% convertibles closed at about 105, versus a share price of $24.17, on its first day of trading, according to a syndicate source, a gain of about 2 points delta neutral given that the shares gained to above $24 from $23.

Few trades were seen in the Street, however, sources said, and the syndicate source confirmed that while his shop had fairly active dealings in the name, it had gotten in the hands of outright buyers, who were looking for exposure to solar power with bonds that were near par.

Based in Hebei, China, JA Solar makes solar cells.

The issue was upsized to $350 million from $300 million, and the issue of five-year senior convertible notes priced at the cheap end of talk, which was for a coupon of 4% to 4.5% with an initial conversion premium of 32.5% to 37.5%.

Concurrently, JA Solar priced an offering of American depositary shares at $23 per share, which are being borrowed by affiliates of the joint book-running managers. Lehman Brothers Inc. and Credit Suisse Securities (USA) LLC are joint book-running managers of the offerings.

The notes are non-callable for three years, then provisionally callable subject to a 130% hurdle. There are no puts, other than a change of control put.

JA Solar intends to use proceeds for the purchase and construction of manufacturing equipment and facilities, the purchase and prepayment of raw materials, working capital, and other general corporate purposes.

The American depositary shares of JA Solar (Nasdaq: JASO) gained 47 cents, or nearly 2%, to $24.17.

Other names in the solar power sector with recently issued convertibles are two other Chinese companies: Suntech Power Holdings Co. Ltd. and LDK Solar Co. Ltd.

While they weren't mentioned in trade, Suntech Power's 3% convertibles were indicated higher at 134, compared to 130.6 on Tuesday. Its shares (NYSE: STP) added $2.02, or 4.5%, to $46.81 on the day.

LDK Solar's 4.75% convertibles were up to 112.3 compared to 110.9 on Tuesday, compared to a rise of 63 cents, or 1.75%, to $36.57 for its shares listed on the New York Stock Exchange under the ticker LDK.

LDK is a solar power wafer maker based in China's Xinyu City, and Suntech is a Wuxi, China-based maker of solar cells.

ShengdaTech plans $100 million

Another China-based company, ShengdaTech announced Wednesday that it plans to price $100 million of 10-year senior convertible notes on May 21 via bookrunner Oppenheimer & Co.

The Rule 144A notes were talked to yield a coupon of 4.5% to 5% with an initial conversion premium of 22.5% to 27.5%.

The notes are non-callable for three years, and provisionally callable for two years after that subject to a 150% hurdle. There's a put after 3.5 years.

ShengdaTech expects to use about $56 million of proceeds to expand its nano precipitated calcium carbonate, or NPCC, production capacity, while the remaining proceeds will be allocated to potential coal-based chemical acquisitions, strategic investments and to fund working capital.

Based in Tai'an City, Shandong Province, China, the company makes and markets NPCC and coal-based chemicals. The products are used in various applications, including tires and polyvinyl chloride, or PVC, building materials.

The American Depositary shares of ShengadaTech (Nasdaq: SDTH) closed down 23 cents, or 2.4%, to $9.31 on Wednesday.

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