Navistar gains on guidance; DryShips, Epicor also add, but Kodak drags; Excel, Nielsen price

By Rebecca Melvin

New York, Jan. 25 - Navistar International Corp. gained outright and was about 0.5 point higher on a hedged basis after the Warrenville, Ill., truck and engine maker raised its guidance for 2011 earnings, citing an improving economy.

DryShips Inc. was also about 0.5 point better on hedge from the previous levels, and its shares were lower.

Epicor Software Corp. was another name that traded up from previous levels. It was several points better as a significant buyer stepped in and lifted a higher offer, a sellside trader said.

But Eastman Kodak Co. dragged, changing hands at 96.5 versus an underlying share price of $4.50, after the Rochester, N.Y., digital imaging company said that the International Trade Commission initially determined that its patent infringement suit was not valid.

In the primary market, Excel Trust Inc. priced $50 million of cumulative convertible perpetual preferred stock, with a liquidation preference of $25 per share, to yield 7% with a 14% initial conversion premium, according to a syndicate source.

The new Excel preferreds had a solid outright book and were quiet in the secondary market.

After the market close, Nielsen Holdings BV priced its $250 million of two-year mandatory convertible subordinated bonds to yield 4.25% with an initial conversion premium of 25%, which was the rich end of talk.

Navistar gains on guidance

Navistar's 3% convertibles due 2014 traded 142 bid, 142.125 offered versus a share price of $62.30 during the session, which was about 0.5 better on hedge than previous levels with the stock up on higher earnings guidance, a New York-based sellside trader said.

The company forecast its 2011 profit above the average Wall Street estimate, saying an improving economy would cause a rebound in sales of trucks while lower costs and strong parts sales would support profits.

Navistar said it believes that net income for its fiscal year ending Oct. 31, 2011 will be between $388 million and $466 million, equal to $5.00 to $6.00 diluted earnings per share, excluding transition costs associated with the integration of the truck and engine engineering operation and the potential positive impact of income tax valuation adjustments.

That is better than the $4.65 per share that analysts on average had expected.

The company estimated that its industry retail sales of medium- and heavy-duty trucks and school buses would reach 240,000 to 260,000 in the United States and Canada, up from fewer than 200,000 last year, even though the school bus market faces pressure from depressed local budgets.

Truck industry volume in fiscal 2010 was 191,300 units.

DryShips adds 0.5 point

DryShips' 5% convertibles due 2014 traded Tuesday at 98.4375 versus a share price of $4.91, which was up 0.5 point on the day, according to a sellsider.

Shares of the Athens-based dry bulk and drilling rig company settled lower by 15 cents, or 3%, at $4.76.

The bonds trade on a 75% delta.

The bonds are up about 11 points from summer lows, a New York-based sellsider said.

"The bonds are cheap but still a dicey credit. You need to do your homework on this one," the sellsider said, adding that most players are using a credit spread of Libor plus 750 basis points for valuing the bonds.

Epicor trades up

Epicor's 2.375% convertibles due 2027 traded to as high as 101, up from previous sales of about 96 or 97.

Shares of the company settled unchanged at $10.02 in average volume.

"Epicor unexpectedly traded up a few points," a West Coast-based sellsider said. "It's not a big name, and it doesn't trade much; but there was a buyer out there, and it was up five points or so from last levels."

Epicor, an Irvine, Calif.-based developer of enterprise application software solutions, priced $200 million of the bonds with a $30 million greenshoe in May 2007. The paper is callable and putable in May 2014.

Excel quiet on debut

Excel's newly price 7% convertible perpetual preferreds were quiet Tuesday on their debut after pricing. Shares of the San Diego-based real estate investment trust dropped 28 cents, or 2%, to $12.87.

The retail property REIT's deal had a "solid outright book and not much activity" in aftermarket trading, a syndicate source said.

Being a REIT, the company wanted to do a preferred to retain the equity treatment on its balance sheet in order to strengthen the balance sheet, the syndicate source said.

The Rule 144A deal, which has a $7.5 million greenshoe, was sold via joint bookrunners Stifel, Nicolaus & Co., Inc. and Raymond James & Associates Inc.

Holders can convert at any time at an initial conversion rate of 1.6667 shares of common stock per share of preferred stock, which is equivalent to an initial conversion price of $15.00 per share.

Starting April 1, 2014, Excel can convert if the closing price of the common stock is at least 140% of the conversion price for 20 out of 30 consecutive trading days.

Proceeds will be used to repay a portion of debt under the company's revolving credit facility.

Nielsen prices mandatories, IPO

Nielsen's $250 million 6.25% mandatories priced after the close of markets at the rich end of talk, which was for a yield of 6.25% to 6.75% with an initial conversion premium of 15% to 20%.

Nielsen also priced an initial public offering of common stock at $23.00 per share. The shares will be listed on the New York Stock Exchange under the ticker symbol "NLSN."

Mentioned in this article:

DryShips Inc. Nasdaq: DRYS

Eastman Kodak Co. NYSE: EK

Epicor Software Corp. Nasdaq: EPIC

Excel Trust Inc. NYSE: EXL

Navistar International Corp. NYSE: NAV

Nielsen Holdings BV Nasdaq: NLSN

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