Investment-grade names attract buyers, improve; St. Mary Land active; Vale, Regis to price

By Rebecca Melvin

New York, July 6 - Convertibles players Monday were buyers of shorter-dated, investment-grade paper as trading geared up following the holiday weekend when markets were closed Friday in observance of the Fourth of July.

The improvement in investment-grade convertibles names marked a continuation of a trend underway for several days, sources said.

There's a "definite flight to shorter-dated, investment-grade stuff. I think it's the safety, summer trade. Credit seems overdone and hard to step in at these prices," a New York-based sellside trader said.

Among names in play were Transocean Ltd. and Amgen Inc.

Another possible reason for the improvement in investment-grade names is that investors are seeking alternatives to liquid names like Prudential Financial Inc.'s floating-rate convertible notes due 2037, which were putable June 16, and Wyeth floating-rate convertible due 2024, which are callable and putable later this month.

"You have to have the capital migrate somewhere," a New York-based sellsider said.

Elsewhere, a sellsider noted that St Mary Land & Exploration Co. was active in trade.

In the primary market, Vale SA planned to price about $1 billion of three-year mandatory convertibles in two tranches after the close of markets Tuesday, and Regis Corp. planned to price $125 million of five-year convertible senior notes after the market close on Wednesday.

"People are gearing up, but the markets are not helping," a New York-based syndicate source said. "There is a lot of pessimism, and investors are pulling back; people are selling out to get more liquidity. The unemployment report last week didn't help."

Transocean improves

Transocean remained active on Monday after accounting for a large chunk of convertibles trading on Thursday. Pricing on the offshore drilling company's securities was firm despite a drop in the price of oil and other commodities.

But Transocean's 1.625% series A convertibles due 2037 traded during the session at 96.5 versus a share price of $68.80, which was better compared to Thursday on a dollar neutral basis.

The 1.625% paper can be put in December 2010.

Transocean's 1.5% series B convertibles due 2037 were at 92.25, up from 92.125; meanwhile, the Transocean 1.5% series C convertibles due 2037 were at 89.125, up from 88.5 previously.

Transocean common stock closed lower by 1% to $69.97, having gradually pared losses during the session.

Amgen remains strong

Amgen 0.125% convertibles due February 2011 were in trade at 96, up from 95.5 on Thursday, which marked continued strength after improving slightly even as the common slipped on Thursday. The Amgen 0.375% convertibles due February 2013 were not heard in trade.

Last week, both Amgens moved while the stock was weaker. And that move followed the previous week's trades - at the end of June - that moved up in line on mostly outright trades.

Shares of the Thousand Oaks, Calif.-based biotechnology company started Monday's session lower but gradually gained ground to end up by 1% for a $52.05 close.

Vale plans $1 billion of mandatories

Brazilian mining giant Vale planned to price about $1 billion of three-year mandatory convertibles in two tranches after the close of markets Tuesday.

The registered offering was talked at a coupon of 6.25% to 6.75% with an initial conversion premium of 17.5% to 22.5% for both tranches, according to a syndicate source.

Citi and J.P. Morgan are joint bookrunners.

The paper will be issued through wholly owned subsidiary Vale Capital II.

Under an agreement between Vale and Vale Capital II, Vale will sell to Vale Capital II the number of ADSs that Vale Capital II will require to satisfy its obligations under the terms of the notes. The Brazilian Securities Commission authorized Vale's use of treasury stock to constitute the ADSs it will sell to Vale Capital II.

The first series, the VALE-2012 notes, will be converted to American Depositary Shares representing one common share of Vale, and the second series, the VALE.P-2012 notes, will be convertible into preferred class A shares. Together, the ADSs will represent up to 18.4 million common shares and 47.28 million preferred class A shares.

Vale will use proceeds for general corporate purposes.

Rio de Janeiro-based Vale is a diversified metals and mining company.

Regis to price

Regis plans to price $125 million of five-year convertible senior notes after the market close Wednesday, and the paper was talked to yield 4.75% to 5.25% with an initial conversion premium of 22.5% to 27.5%.

Regis also plans to price 11.5 million shares of common stock.

The convertible notes are non-callable for life and have no puts.

Proceeds will be used to repay $267 million of private placement debt of varying maturities, with remaining proceeds earmarked for general corporate purposes, including the repayment of bank debt.

Merrill Lynch & Co. and Credit Suisse Securities (USA) LLC are joint bookrunners of the Minneapolis-based hair care salon franchise company's offerings.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Regis Corp. NYSE: RGS

St. Mary land & Exploration Co. NYSE: SM

Transocean Ltd. NYSE: RIG

Vale NYSE: VALE

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.