Quantum trades up to 102.5 on debut; new Radian at par; SL Green, Massey Energy head lower

By Rebecca Melvin

New York, Nov. 10 - Quantum Corp.'s newly priced 3.5% convertibles traded up to 102.5 out of the chute Wednesday on their debut in secondary dealings and then settling back to about 102 for most of the session, a syndicate source said.

The new Quantum bonds traded "as expected," without a great deal of secondary market activity, given that the offering was allocated primarily to outright investors and existing shareholders, the source said.

Radian Group Inc.'s new 3% convertibles, which debuted Tuesday, traded at 100 versus a share price of $8.20 and were seen slightly higher at 100.9 at the close versus the underlying shares' settle at $8.46. The new Radian convertibles had jumped to as high as 106 on their debut but fell back to near par during that session.

No new issues were launched Wednesday, and trading was light in established issues, sources said.

The slow pace was contrary to expectations that a flurry of activity sparked last week by the Federal Reserve's news on quantitative easing would continue into this week. In addition, there was less earnings news in convertibles names.

"Earnings have tailed off. I didn't hear a lot of activity," a Connecticut-based sellside analyst said.

In the absence of strong bids, pricing appeared to weaken slightly.

SL Green Realty Corp. traded at 101 versus a previous level of about 103; and Massey Energy Co. dropped back a little from elevated trades on Monday on takeover chatter.

On the other hand, Priceline.com Inc. was steady after gains the Norwalk, Conn.-based online travel agency notched Tuesday on better-than-expected third-quarter earnings and its fourth-quarter forecast; and Hologic Inc. also remained a name of interest in the aftermath of the Bedford, Mass.-based medical imaging and diagnostic company's fourth-quarter loss posted after the market close Monday.

Quantum trades at 102

Quantum's 3.5% convertibles due 2017 traded right around 102 during the session with shares trading right around the flat line.

Although shares rose in the afternoon, a closing level for Quantum versus the higher stock price wasn't immediately available.

"They were at 102 for most of the session," a syndicate source said.

Shares of the San Jose, Calif., provider of storage, backup, recovery and archive services gained from about noon ET on, settling up 14 cents, or 4.3%, to $3.41.

The deal priced richer than talk, which was for a yield of 3.625% to 4.125% and a 25% to 30% initial conversion premium.

The new seven-year paper, with no calls or puts, acted as expected after $125 million of the bonds priced in contrast to Radian, which priced an upsized $400 million of bonds a day earlier and saw pricing rise then fall to near par.

"It's a strong fundamental story, from a corporate finance standpoint," a syndicate source said of the Quantum deal. "It's a balance sheet cleanup, and now they have a lower interest rate and they take out expensive debt."

The Quantum deal has an over-allotment option for up to an additional $10 million of notes.

The Rule 144A deal was sold via UBS Securities and Jefferies as joint bookrunners.

Proceeds will be used to repay the company's 12% senior subordinated term loan agreements with EMC, and any remaining proceeds will be used to pay down Quantum's senior secured credit agreement with Credit Suisse.

Mortgage insurer Radian's newly priced 3% convertibles traded up to 106 versus a share price of $8.82 on Tuesday. Later, the new convertibles settled at 100.5 bid, 101 offered.

Shares of the Philadelphia-based mortgage insurer extended losses on Tuesday, dropping 55 cents, or nearly 6%, in heavy volume, after suffering an 11% fall on Monday after the deal was launched.

Mentioned in this article:

Hologic Inc. Nasdaq: HOLX

Massey Energy Co. NYSE: MEE

Priceline.com Inc. Nasdaq: PCLN

Quantum Corp. NYSE: QTM

Radian Group Inc. NYSE: RDN

SL Green Realty Corp. NYSE: SLG

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