J.P. Morgan top U.S. market convertibles underwriter year to date

• U.S. market convertibles issuance nearly $23 billion year to date

• August convertibles issuance totals just $463 million in two deals

By Rebecca Melvin

New York, Aug. 31 - J.P. Morgan Securities Inc. remained the top U.S. market convertibles underwriter for the first eight months of 2009, although Goldman Sachs & Co. was the No. 1 underwriter for August.

Meanwhile, August was the quietest month in terms of new issuance since February, with only two new deals, according to data compiled by Prospect News.

For the year to date, JPMorgan accounted for $6.02 billion in 37 deals, which was 26% of total issuance of $23 billion.

Bank of America was the No. 2 U.S. market convertibles underwriter for the year to date, with 25 deals totaling $2.90 billion, or 12.6% of the total.

Through the first eight months of last year, JPMorgan ranked fourth among underwriters, but for a greater amount of issuance, or $8.03 billion, compared to this year's total year to date.

Year to date issuance in 2008 was $60.63 billion, or more than double the amount issued so far this year.

For 2009 year to date, Citigroup ranked as the No. 3 underwriter, running the books on 18 deals totaling $2.71 billion, or 11.8% of the total. And Morgan Stanley was a close fourth, with 16 deals, totaling $2.51 billion, or 10.9% of the total. The two firms reversed slots since the end of the second quarter.

New issuance for August - the middle of the third quarter - was quiet, and marked a changed from the second quarter when primary market activity was strong.

"The primary market turned quiet with only two deals pricing after five active months," Barclays Capital convertibles analysts wrote in a report published Monday.

Onyx Pharmaceuticals Inc., which was a $230 million primary deal, and Rayonier TRS Holding (Rayonier Inc.), which was a $172.5 million primary deal, accounted for the entire calendar in August, Barclays analysts wrote.

Both deals priced Aug. 6.

The underwriters of those deals in addition to Goldman Sachs were Bank of America, Credit Suisse and JPMorgan. But Goldman Sachs was responsible for nearly 50% of the month's total, as bookrunner of the $230 million Onyx deal.

August did bring other new paper, however, in the form of 0% convertibles due 2019, which E*Trade Financial Corp. swapped with holders of some of its straight debt maturing in 2011 and 2017.

The exchanged E*Trade paper, including a series A tranche totaling $1.7 billion and a series B tranche totaling only $2 million, pushed the monthly new paper volume total out to about $2.4 billion, if it is counted.

Of August's new issues, average cheapness of 2.78% marked a continuing tightening trend since April, wrote the Barclays analysts Venu Krishna, Manoj Shivdasani and Peng Cheng.

The average one-day trading return assuming delta hedged position was positive at 3.63%, they added.

Rayonier was rated BBB and Onyx was not-rated. Investment grade issuance comprised 40% of total deal proceeds year to date, compared to 45% in 2008 and 36% in 2007, Barclays wrote.

Weighted average yields for August were a little lower at 4.2% compared to a 4.9% yield for the year to date, and average premiums were a little higher at 26.8%, compared to a 23.7% premium for the year to date. Yields and premiums were both higher for 2008, with the average yield at 6.1% and the average premium in 27.8%.

Organic growth for August was negative $1.25 billion; and for the year to date, net organic growth was negative $19.6 billion, the Barclays analysts wrote, driven largely by financial preferred exchanges, in which convertible preferred shares were exchanged for common stock.

Year to date

2008 Comparables

	Underwriter	Amount	No.	Share	Rank	Amount	No.	Share
1	JPMorgan	6.017	37	26.17%	4	8.028	30	13.24%
2	Bank of America	2.901	25	12.62%	1	11.476	24	18.93%
3	Citigroup	2.707	18	11.77%	2	9.256	22	15.27%
4	Morgan Stanley	2.505	16	10.89%	7	2.671	18	4.41%
5	Credit Suisse	2.442	14	10.62%	9	2.421	17	3.99%
6	Goldman Sachs	2.412	16	10.49%	5	6.968	20	11.49%
7	Deutsche Bank	1.290	8	5.61%	11	2.331	11	3.85%
8	Barclays	1.175	8	5.11%	12	0.276	1	0.46%
9	Wachovia	0.605	5	2.63%	8	2.561	6	4.22%
10	Calyon	0.267	1	1.16%
10	SG	0.267	1	1.16%
	Total	22.995	73	60.625	103
	Average size:	0.315	0.589
August
					2008 Comparables
	Underwriter	Amount	No.	Share	Rank	Amount	No.	Share
1	Goldman Sachs	0.230	1	49.73%
2	Bank of America	0.058	1	12.43%	2	0.494	3	21.70%
2	Credit Suisse	0.058	1	12.43%	6	0.177	2	7.79%
3	JPMorgan	0.058	1	12.43%	1	0.649	3	28.50%
	Total	0.463	3	2.278	6
	Average size:	0.154	0.380
Prospect News Convertibles Underwriter Rankings

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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