Cameron steady at a point over parity; DryShips drops outright; Iconix, Callidus to price

By Rebecca Melvin

New York, May 16 - Cameron International Corp., which was a busy name in the convertible bond market on Friday, remained actively traded on Monday and was about a point above parity - in line with where trades went off on Friday - but lower outright as the underlying shares of the Houston oil drilling equipment and services company slipped.

Transocean Ltd.'s 1.5% series C convertibles was also steady and active. Both Cameron and offshore oil drilling rig operator Transocean are involved in lawsuits having to do with their roles in the Macondo well oil spill disaster in the Gulf of Mexico last year on April 20.

Elsewhere in the energy space, coal names were active, including Peabody Energy Corp. and Massey Energy Co.

Coal convertibles have held their value or improved on a hedged basis over the last week or so as coal stocks have taken a hit related to fears over potential slowing of the global economy, a New York-based sellside trader said.

Meanwhile, DryShips Inc. saw its 5% convertibles fall to about 91 from 95 along with a 6% to 7% drop in their underlying shares as the Athens-based dry bulk shipping company sold off after Goldman Sachs & Co. lowered its price target on the shares, citing higher expenses and crimped earnings.

Last week, DryShips let it be known that it intends to spin off its deepwater oil-drilling business in the next few months following the procurement of key long-term contracts for two of its drill rigs.

The convertible primary market was quiet during the trading session, but after the market close two new deals were launched. Both deals, Iconix Brand Group Inc.'s $275 million of five-year convertible senior subordinated notes and Callidus Software Inc.'s $70 million of five year senior convertibles, are expected to price after the market close Tuesday.

Cameron stands pat

Cameron's 2.5% convertibles due 2026 traded down outright to 139 from 141 on Friday.

Despite the move, the bonds still stand at a point over parity, which was in line with where the paper was on Friday, sources said.

Shares of the Houston-based oil services products and services company slipped 76 cents, or 1.5%, to $48.89 each in pretty active trade Monday.

The paper, which has dropped sharply along with the underlying shares in recent weeks, has been "crossing at about a point over parity for the last week," a New York-based sellside trader said.

"They were trading right around parity until about a week and a half ago. There were buyers that emerged last week and pushed it up. It's the same price point as Friday."

The paper is callable next month on June 20.

"I would think these will be called next month," a second New York-based sellside trader said.

Transocean steady

Transocean's 1.5% series C convertibles due 2037 traded at 98.35 during the session, according to a New York-based sellside desk analyst.

The bonds of the Vernier Switzerland-based oil drilling services contractor trade outright and have about 1.5 years left before they are callable/putable. The notes are currently out of the money.

"It's basically a yield play, so it's doesn't move all that much one way or other, but that's what we were saying this time last year also," a New York-based sellside trader said, referring to a sharp drop last year related to the Deepwater Horizon explosion and oil spill disaster.

BP has accused Cameron and Transocean of negligence. The Transocean deep water drilling platform contracted to BP blew up and sank, killing 11 workers and spilling more than 200 million gallons of crude into the Gulf in what has been called the worst oil spill in U.S. history. Cameron was the blowout preventer contractor.

In the current lawsuit, which BP filed in the last month in a federal court in New Orleans, the British energy company is alleging that the spill was Transocean's fault. Transocean has also filed its own suit against BP, as has Cameron.

Iconix to price

After the market close Monday, Iconix launched a convertibles deal that was talked at a coupon of 2.5% to 3% and an initial conversion premium of 27.5% to 32.5, according to a syndicate source.

Barclays Capital Inc. and Goldman Sachs & Co. are joint bookrunners of the Rule 144A offering, which has a $25 million greenshoe.

Shares of the New York-based brand management company moved lower by 2% in after-hours trade.

The notes are non-callable and have no puts. There is contingent conversion at a price hurdle of 130%.

Proceeds will be used to fund the cost of the convertible note hedge transaction with hedge counterparties, to prepay the outstanding balance of indebtedness under its term loan facility due Jan. 1, 2012, to make future repayment on existing 1.875% convertibles, which may be on or prior to the June 30, 2012 maturity date, and for general corporate purposes, which may include investing in or acquiring new brands through opportunistic mergers, stock or asset purchases and/or other strategic relationships.

Callidus to price

Callidus launched notes after the market close on Monday that were talked to yield 4.5% to 5%, with an initial conversion premium of 22.5% to 27.5%, according to a syndicate source.

The Rule 144A offering is being sold via Morgan Stanley & Co. Inc. with Roth Capital Partners as co-manager.

The notes, which have a 15%, greenshoe, are non-callable for three years and then .provisionally callable subject to a price hurdle of 130%.

Proceeds are earmarked to repurchase shares of common stock and for general corporate purposes, which may include acquisition of complementary businesses, products or technologies.

Shares of the Pleasanton, Calif.-based sales software company dropped 5% in after-hours trade.

Mentioned in this article:

Callidus Software Inc. Nasdaq: CALD

Cameron International Corp. NYSE: CAM

DryShips Inc. Nasdaq: DRYS

Iconix Brand Group Inc. Nasdaq: ICON

Massey Energy Co. NYSE: MEE

Peabody Energy Corp. NYSE: BTU

Transocean Ltd. NYSE: RIG

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