Serologicals upsized, Apria prices but InVision reslated for Monday due to blackout

By Ronda Fears

Nashville, Aug. 15 - It was virtually business as usual in the convertible universe following the largest blackout in U.S. history. All the bulge bracket firms went to backup systems - some immediately when the outage struck - but nonetheless, it was a very thin market even for a Friday.

Dealers at the big firms were talking about "a few trades" and those at smaller shops commented about "a trade or two." No one reported any major trouble with setting up the day because of lingering outages, though, thanks to backup generators.

Convertible trading was slim, but lots of hedge fund players were active in stocks as it was options expiration day.

Deutsche Bank Securities head of U.S. convertibles research Jeremy Howard summed it up for most shops: "Today was a bit of a wash."

Trading volume was extremely thin but operable on whole. The primary market, however, was slightly dimmed by the blackout as one of three deals failed to get executed because of the power outages.

Apria Healthcare Group Inc. and Serologicals Corp. priced their deals without a hitch, and Serologicals even upsized, but InVision Technologies Inc. was rescheduled for after the close Monday.

Apria's $200 million deal, which was sweetened at least once during the one-day marketing effort, priced to yield 3.375% with a 32% initial conversion premium - at the middle of revised yield talk and cheap end of revised premium guidance..

The issue was first talked to yield 2.75% to 3.25% with a 35% to 40% initial conversion premium, then sweetened to a 3.0% to 3.5% coupon, up 32% to 35%.

Serologicals sold an upsized $110 million of convertibles to yield 4.75% with a 27.5% initial conversion premium - at the cheap end of yield talk and midpoint of premium guidance. It was boosted from $100 million.

"The pricings are finally going my way and we liked the Serologicals deal," said a convertible hedge fund manager in New Jersey, whose business was not shut down by the blackout although New Jersey was severely impacted by the problems.

"The problem today was that there's no liquidity in the market."

The Serologicals deal was last seen bid at 101.75 with an offer of 102, the manager said.

InVision's small $100 million deal, however, was officially pushed back to price after Monday's close. A buyside source said it appeared the deal was ready to go, but computer systems at bookrunner Merrill Lynch were snagged due to the power outage.

"We heard the deal was ready but there was some problem with the systems at Merrill," the source said. "It could be, too, though, that not everybody who needed to be there was able to" get to the office.

Merrill Lynch capital markets officials were not available to comment about the deal.

Most of the co-managers - Deutsche, Dresdner Kleinwort Wasserstein and Needham & Co. - were notified that the deal would be pricing Monday.

InVision's 20-year convertible senior notes are talked to yield 2.25% to 2.75% with a 27.5% to 32.5% initial conversion premium.

At the midpoint of guidance, Lehman Brothers puts the InVision deal 1.88% rich, using a credit spread of 650 basis points over Treasuries and a 35% stock volatility. Another sellside shop put it 1% rich, using a credit spread of 550 bps over Libor and a 35% stock volatility.

Elsewhere, only a few trades were mentioned by dealers.

Activity in Shaw Group Inc. was noted on the back of news that the construction firm is in talks to settle its claims with bankrupt NRG Energy Inc., a unit of Xcel Energy Inc.

On Thursday, both parties acknowledged the settlement talks but a time frame to settle the dispute remains uncertain. NRG filed bankruptcy in May.

Shaw sued NRG over a Mississippi power plant that it was building for NRG and terminated the contract for the project. That dispute has been going on for nearly a year, and Shaw estimates it is owed upward of $130 million in costs and fees above what it has already been paid.

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