• Banc of America is top U.S. market convertibles underwriter for 2008
By Rebecca Melvin
New York, Dec. 31 - U.S. convertible new issuance for the whole of 2008 totaled $61.825 billion, which was 36% below total last year's convertible new issuance total of $96.756 billion for the U.S., according to data compiled by Prospect News.
In terms of numbers of deals, 2008 saw 106 new deals for the year, compared to last year's 198 deals.
New issuance volume remained virtually unchanged for more than three months after the primary market virtually shut down in September in the aftermath of the government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers Holding Co., the government bailout of American International Group Inc., and other financial market turmoil that spurred such linkups as Bank of America with Merrill Lynch.
A shutdown of such length is extremely rare. Even in 2001 when the financial markets were disrupted by the terrorist atrocities on Sept. 11, the convertible bond new issue market was only shut down for a month until Oct. 6.
But after four deals that got done in the first half of September, the convert primary market was unchanged for October, November and December.
The fourth quarter is typically a period of strong issuance for convertibles. The fourth quarter of 2007, for example, saw $26.3 billion of new issuance, or more than one-quarter of the year's total. In December 2007 alone there was $17.1 billion of new deals, or nearly 20% of the year's total.
Convertible new issuance had begun to slow prior to the September meltdown. For August 2008, there were $2.3 billion in new issues priced in the market, which was considered "subdued," compared to $3.2 billion priced in July.
Of new issues for 2008, more than half were from the financial sector. But energy was also a strong component of the mix as well.
Banc of America was the top ranking U.S. market convertible underwriter for 2008, accounting for 18.6% of total issuance, with $11.476 billion in 24 deals, compared to last year's top ranking underwriter, Citigroup, with $17.4 billion, or 18%, of the total in 41 deals.
This year, Citigroup ranked as the No. 2 underwriter with $9.256 billion in 22 deals, or 15% of the total; and Lehman Brothers, which filed for bankruptcy protection Sept. 15, stood in third place, with $8.469 billion of new issuance in 12 deals, or 13.7% of the total. JP Morgan and Goldman Sachs rounded out the top five rank slots, with $8.25 billion and $7.4 billion, respectively.
Fully half of the top 10 underwriters accounted for less than $3 billion of new issuance each, including Merrill Lynch, UBS, Morgan Stanley, Wachovia, and Credit Suisse.
When the market will "re-open" for business is unclear. Some convertibles players say new deals could come as early as the end of January. But others hold that it may be another six months before the market recovers enough to encourage new issuance.
Year to date
2007 Comparables
| Underwriter | Amount | No. | Share | Rank | Amount | No. | Share
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| 1 | Banc of America | 11.476 | 24 | 18.56% | 8 | 6.146 | 32 | 6.35%
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| 2 | Citigroup | 9.256 | 22 | 14.97% | 1 | 17.453 | 41 | 18.04%
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| 3 | Lehman | 8.469 | 12 | 13.70% | 5 | 8.705 | 24 | 9.00%
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| 4 | JPMorgan | 8.253 | 31 | 13.35% | 2 | 12.944 | 48 | 13.38%
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| 5 | Goldman Sachs | 7.430 | 22 | 12.02% | 4 | 9.474 | 28 | 9.79%
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| 6 | Merrill Lynch | 2.901 | 19 | 4.69% | 7 | 8.232 | 33 | 8.51%
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| 7 | UBS | 2.786 | 17 | 4.51% | 10 | 3.539 | 20 | 3.66%
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| 8 | Morgan Stanley | 2.671 | 18 | 4.32% | 3 | 9.644 | 18 | 9.97%
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| 9 | Wachovia | 2.561 | 6 | 4.14% | 12 | 1.517 | 8 | 1.57%
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| 10 | Credit Suisse | 2.421 | 17 | 3.92% | 9 | 5.633 | 22 | 5.82%
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| Total | 61.825 | 106 | 96.756 | 198 |
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| Average size: | 0.583 | 0.489 |
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| Fourth quarter |
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| | | | | 2007 Comparables |
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| Underwriter | Amount | No. | Share | Rank | Amount | No. | Share
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| Total | 0.000 | 0 | 26.346 | 38 |
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| Average size: | - | 0.299 |
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| December |
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| | | | | 2007 Comparables |
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| Underwriter | Amount | No. | Share | Rank | Amount | No. | Share
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| Total | 0.000 | 0 | 17.080 | 17 |
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| Average size: | - | 1.005 |
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| Prospect News Convertibles Underwriter Rankings
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Criteria
• The tables include all underwritten dollar-denominated offerings sold in the United States as public or Rule 144A deals reported to Prospect News.
• Offerings are included in the time period in which they price.
• Amounts are based on the total sales price (face amount multiplied by the offering price). The full amount is credited to the bookrunner (or lead manager if no bookrunners). For multiple bookrunners (or lead managers), the total value is divided equally among all the firms.
• Each tranche is counted as a separate deal.
• Bonds are included that convert into the issuer's or another company's stock or the cash equivalent; bonds that convert into other bonds are excluded.
• Structured products issued by an investment bank and exchangeables for or linked to another company's stock are excluded.
• Units made up of a bond and stock are included; units made up of a bond and warrants are excluded.
• Preferred issues are included using the same criteria as for bonds.
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