New Maiden mandatory holds at par against lower common stock; DryShips flat; Cemex in line

By Rebecca Melvin

New York, Sept. 26 - Maiden Holdings Ltd.'s newly priced mandatory convertible preferreds traded flat to a little higher out of the chute Thursday and ended the day at essentially unchanged despite a lower common stock that came off 1.2%.

The Bermuda-based reinsurance company priced an upsized $150 million of the 7.25% preferreds at the midpoint of talked terms, and they were quoted $50.00 bid, $50.30 offered at the close versus the $12.25 stock price. The preferreds have a $50.00 par.

Volume was light in the name, which was the case for the overall convertibles market, market sources said.

"It's been very quiet this week," a New York-based trader said. "The first couple of weeks [of September] were definitely active, but not this week."

Pricing action was in line with the underlying shares, meaning that pricing was flat on a dollar-neutral, or hedged, basis.

Given nearly $30 billion in new issuance for the year to date, the trader was surprised that more of the new paper hadn't begun trading in the secondary market yet. "You would have figured that by the fall, it should catch up," the trader said.

Back in established issues, DryShips Inc.'s 5% convertibles due 2014 were trading a good amount on Thursday, and they had recouped from a drop to about 96 last week, but were little changed on the day, at 98 bid, 98.25 offered, market sources said.

In the same sector, Genco Shipping & Trading Ltd.'s 5% convertible due 2015, which had also improved in recent days, was quiet despite a sharp drop in the underlying shares.

The convertibles of Cemex SAB de CV have been more active than usual in the past few days, but that paper was seen unchanged on a delta-neutral basis over the same time period.

An exception to generally flat trading was Exelixis Inc.'s 4.25% convertibles due 2019. These notes have "tacked on a couple of points" in recent days dollar neutral, a trader said. On Thursday the convertibles of the San Francisco-based cancer therapy developer were up to around 117.5 at the end of the session, from 115.25 bid and 115.75 offered Wednesday.

"They are optically cheap and the stock borrow has improved. Guys seem to be shifting around, gravitating to what they need," a trader said about the Exelixis improvement.

New Maiden around par

Maiden's newly priced mandatory convertible preferreds were indicated $50.35 bid, $50.85 offered in early dealing before there was an indication on the stock, a syndicate source said.

A separate syndicate source quoted the paper in late morning trade at $50.00 bid, $50.35 offered.

At the close, the paper was quoted at both $50.00 bid, $50.30 offered and also at $50.00 offered.

Shares of the Hamilton, Bermuda-based reinsurance holding company opened 3 cents lower and closed down 21 cents, or 1.8%, at $12.18 in heavier-than-average trade.

The upsized $150 million of mandatories were allocated mostly to outrights, although there was some hedged participation, a syndicate source said. The deal was initially going to be $135 million in size.

Pricing came at the midpoint of talk, which was a 7.25% dividend and a 25% premium.

Joint bookrunning managers of the series B mandatory convertible preference shares were Goldman Sachs & Co., Morgan Stanley & Co. LLC and BofA Merrill Lynch.

Wells Fargo Securities LLC was a joint lead manager. Co-managers were FBR, Sterne, Agee & Leach, Inc. and JMP Securities. The preferreds will be listed.

Proceeds will be used for general corporate purposes, primarily to support continuing growth of its reinsurance operations, with remaining proceeds to be invested in marketable fixed income securities and short-term investments.

DryShips, Genco add

DryShips' 5% convertibles due 2014 were quoted at 98 bid, 98.25 offered at the end of the session. Shares of the Athens-based shipping company were down 7 cents, or 1.8%, at $3.86.

The DryShips convertibles were little changed on the day, but they had regained ground from a drop last week to about 96.

"It's been pushing higher," a Connecticut-based trader said of the DryShips convertibles. "The whole sector has rallied."

Genco's 5% convertibles due 2015 traded up to the mid 40s from the mid 30s during the same time frame. But those bonds were quiet on Thursday.

But Genco shares fell 32 cents, or 7%, to $4.12.

A second trader said of the DryShips' bonds that they had strengthened after getting "a large seller out of the way."

Cemex unchanged

Cemex's 4.875% convertibles due 2015 were "moving around a little" but were unchanged on a dollar-neutral basis, sources said.

Cemex shares ended the session down 7 cents, or 0.6%, at $11.33.

The laws of supply and demand seemed to be at work in relation to the movement in the Cemex convertibles, a New York-based trader said.

"When they get pushed out with all kinds of offers at the artificially high price, someone comes in with a lower price in the Street and they go back in line," the trader said.

On Thursday, the Monterrey, Mexico-based building materials supplier and cement producer priced $1.4 billion of senior straight notes in two tranches, which will be used to purchase the company's outstanding 9.5% senior secured notes due 2016 issued by Cemex Finance LLC. Remaining proceeds will be used for general corporate purposes.

"They've been active this week. The stock's been active, the bonds have been active, but they haven't moved that much; delta neutral, they are unchanged," a second trader said.

Mentioned in this article:

Cemex SAB de CV NYSE: CX

DryShips Inc. Nasdaq: DRYS

Excelixis Inc. Nasdaq: EXEL

Genco Shipping & Trading Ltd. NYSE: GNK

Maiden Holdings Ltd. Nasdaq: MHLD

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