Huntington remains firm, but Sallie Mae weakens; Medtronic softer ahead of earnings, but Hologic adds

By Rebecca Melvin

New York, May 19 - Huntington Bancshares Inc.'s convertible preferred shares remained steady Monday, continuing Friday's trend in financials, which saw some banking names better, but the overall the sector weaker.

A Boston-based sellside trader put Huntington's convertible preferreds at 982.5 to 983.5, adding "and we traded those."

But the convertible preferred shares of SLM Corp., better known as Sallie Mae, were lower at about 1060 versus a share price of $21, compared to trades at 1070 versus the same share price earlier this month.

Also among names in trade were: Medtronic Inc., which was "better to buy," or softer, ahead of its earnings report expected Tuesday; Amgen Inc., which was flat; and Hologic Inc., which expanded compared to Friday.

Overall, amid an early rise in stock prices and subsequent downturn, the convertible bond market remained quiet on Monday, market participants said.

The downturn in stocks was linked to comments from SanDisk Corp.'s chief executive that high oil is likely to pressure discretionary spending and crimp sales of the flash-memory device maker. The earlier enthusiasm was attributed to the Conference Board's leading economic indicators report, which showed a 0.1% rise in April and in March, fostering bullish sentiment.

Similar moves weren't seen in the convertible bond market. "It was pretty quiet across the board. There was some name-specific trading, but it was mostly ones and twos," a New York-based sellside trader said, referring to one million- to two million-bond trades.

Peabody Energy Corp. was also heard in trade, but few energy names were heard in trade even though crude oil continued its record run on, with prices persisting in pushing up despite news that Saudi Arabia plans to boost its production by more than 3% to about 9.45 million barrels a day starting in June.

Crude oil for June delivery gained another 0.6% to $127.05 on the New York Mercantile Exchange. The price of oil is up more than 30% for the year to date.

In the primary arena, investors eyed EnerSys' planned $150 million of 30-year convertibles, which was announced early Monday, and was expected to price Wednesday, and Chesapeake Energy Corp.'s $500 million of 30-year convertibles that were announced after the close and expected to price Tuesday.

Already on the calendar is Shengdatech Inc.'s planned offering of $100 million of 10-year convertibles, which is expected to price on Wednesday.

Huntington firm, Sallie Mae softer

The Huntington 8.5% perpetual convertible preferreds traded at 982.5 versus a share price of $9.38 on Monday, compared to 983.5 versus a share price of $9.38 on Friday.

"They're expanding as they are cleaning up and being put away," a Boston-based sellside trader said, quoting them better by about 1.5 point since firming began on Thursday.

Shares of the Columbus, Ohio-based bank (Nasdaq: HBAN) closed little changed at $9.38 on Monday, compared to $9.40 Friday.

Sallie Mae's 7.25% series C mandatory convertible preferred stock closed down at 1060, versus a stock price of $21, compared to a close of 1070 versus the same stock price on May 5.

Shares of the Reston, Va.-based student lender (NYSE: SLM) closed down $1.24, or 5.9%, at $19.76.

Medtronic softer, Hologic adds

Medtronic's 1.625% convertibles due 2013 closed at 103.125 versus $47.88, compared to $102.186 versus $46.98 on Friday. The Minneapolis-based medical device maker is expected to report its fiscal fourth quarter results before the open Tuesday with a conference call slated for 8 a.m. ET.

The company is expected to report earnings of 73 cents a share on $3.72 billion of revenue for the quarter ended April 25.

Shares of Medtronic (NYSE: MDT) closed up 90 cents, or 1.92%, at $47.88.

Hologic's convertibles expanded on Monday, regaining some ground lost since the Bedford, Mass.-based medical technologies company reported earnings earlier this month that disappointed investors.

Hologic 2% convertibles due Dec. 15, 2037 traded at 86.5 versus at stock price of $21.50 on Monday, compared to a trade at 85 versus a stock price of $21 on Friday.

Hologic shares (Nasdaq: HOLX) jumped 84 cents, or 4%, to $21.77 in heavy volume.

EnerSys to price $150 million deal

Reading, Pa.-based EnerSys plans to price about $150 million of 30-year convertible senior notes in a registered deal via joint bookrunners Goldman, Sachs & Co. and Banc of America Securities LLC on Wednesday.

The deal was talked to yield 3.125% to 3.615%, with an initial conversion premium of 37.5% to 42.5%, according to a market source.

There is a greenshoe of up to $22.5 million in additional notes.

Concurrently with the note offering, certain stockholders intend to sell 3.4 million shares of EnerSys' common stock, with a greenshoe of 340,000 additional shares. The selling shareholders include Metalmark Capital LLC and other institutional stockholders.

The notes are non-callable for seven years, with puts in years 2015, 2018, 2023 and 2033.

Proceeds of the note offering are expected to be used to repay a portion of $351.4 million currently outstanding under EnerSys' senior secured term loan B.

EnerSys makes industrial batteries.

Chesapeake seen pricing Tuesday

Chesapeake Energy, an Oklahoma City-based oil and natural gas producer, plans to price $500 million of 30-year convertible senior notes on Tuesday afternoon.

The notes were talked to yield 2% to 2.5% and an initial conversion premium of 47.5% to 52.5%, according to a market source.

Concurrent with the notes is an offering of $800 million of straight debt. Together the offerings will be used redeem the company's 7.75% of senior notes due 2015, to repay its revolving credit facility and for general corporate purposes.

The registered convertibles are being sold via Banc of America Securities, Barclays Capital, Credit Suisse, Goldman, Sachs & Co., and UBS Investment Bank.

The notes are non-callable for 10 years, with puts in years 10, 15, 20 and 25. There is net-share settlement, full dividend protection, and contingent conversion. It has a high premium convertible structure, under which warrants worth 0.475 share to 0.525 share will be paid if the share price rises above conversion price.

There a greenshoe for an additional $75 million of convertibles.

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