JPMorgan top U.S. market convertibles underwriter for year to date

• U.S. convertibles issuance stands at $22.77 billion year to date

• August brings no U.S. convertibles issuance

By Rebecca Melvin

New York, Aug. 31 – The convertible bond market saw no new issuance for August due to market volatility and the typical summer slowdown. The void space left league tables unchanged from July.

The top U.S. convertibles underwriter for the year to date through August is J.P. Morgan Securities LLC. The firm has underwritten $4.05 billion in new issuance in 29 deals for 18% of the total, according to data compiled by Prospect News.

That compares to JPMorgan’s $5.54 billion in 26 deals, or 22% of total convertible new issuance, for the same period of 2010.

Goldman Sachs & Co. is the No. 2 underwriter, with issuance also unchanged from July, at $3.98 billion in 16 deals for 17.5% of the total, which compares to $3.31 billion in 11 deals, or 13.3% of the total through the same period of 2010.

Citigroup stands in third place with $3.72 billion in 16 deals for 16.3% of the total, and that compares to Citigroup’s $1.29 billion in 10 deals for 5% of total new issuance volume for the same period of 2010.

With no new issuance for August, the month fell well short of last year’s $2.05 billion of new issuance in four deals priced in August 2010.

Total volume for the year to date through August is $22.77 billion in 72 deals, which is 8% below the same period for 2010 when $24.82 billion in 56 deals was priced.

JPMorgan is top underwriter for global new issuance for the year to date as well, with $5.62 billion of new issuance in 40 deals across the world, accounting for 12.7% of total volume. The firm is followed closely on a worldwide basis by Goldman, which was underwriter for $5.32 billion in 21 deals, accounting for 12% of volume.

Syndication sources are hopeful that September will bring a windfall of new deals, given that the markets have stabilized from the beginning of August.

“There are plenty of people waiting on the sidelines; as long as things remain stable, many people could access the market,” a New York-based syndicate source said.

A second syndicate source said that even if markets remain turbulent, fear could also function to drive some potential issuers into the market.

“We saw that in ’09. People accessed quickly because they thought that maybe they couldn’t later,” the syndicate source said.

The last month that the convertible market saw no new issuance was February 2009. Before that there were a couple of deals in January, but they were not typical and slightly off the run, and included Newmont Mining Corp. and SandRidge Energy Inc.

SandRidge was privately placed and overnight, and the underwriters probably “sold it by bringing people over the wall,” the syndicate source said.

Therefore, “the market didn’t really open [after the crash of 2008] until March 2009, with Johnson Controls Inc., the source said.

One reason that syndicate sources are holding out hope is that high-yield interest rates stand a lot higher at the end of August then they did at the end of July.

For a BB credit, the spread was 678 basis points, compared to 577 bps at the end of July.

“They’ve blown out 75 bps or 100 bps in a month. And for single B, it’s worse: they’ve blown out 150 bps,” the syndicate source said.

“The benchmarks may stay low, but if high yield is at 9% or 10%, then they are going to come to the convertible market,” he said.

Year to date, U.S. market

2010 Comparables

	Underwriter	Amount	No.	Share	Rank	Amount	No.	Share
1	JPMorgan	4.054	29	17.80%	1	5.543	26	22.33%
2	Goldman Sachs	3.978	16	17.47%	2	3.311	11	13.34%
3	Citigroup	3.720	16	16.34%	8	1.297	10	5.23%
4	Morgan Stanley	2.442	15	10.72%	4	2.440	9	9.83%
5	Bank of America	2.284	18	10.04%	3	3.141	18	12.65%
6	UBS	1.264	8	5.55%	11	0.943	7	3.80%
7	Barclays	0.954	8	4.19%	10	1.151	7	4.64%
8	Deutsche Bank	0.833	12	3.66%	5	1.535	10	6.18%
9	Credit Suisse	0.712	7	3.13%	9	1.178	9	4.75%
10	Wells Fargo	0.409	5	1.80%
	Total	22.773	72	24.821	56
	Average size:	0.316	0.443
Year to date, global
					2010 Comparables
	Underwriter	Amount	No.	Share	Rank	Amount	No.	Share
1	JPMorgan	5.618	40	12.74%	2	7.599	37	14.69%
2	Goldman Sachs	5.318	21	12.06%	5	3.526	13	6.82%
3	Citigroup	4.438	20	10.06%	7	2.232	17	4.31%
4	Morgan Stanley	3.868	20	8.77%	3	4.902	17	9.48%
5	Bank of America	2.701	21	6.12%	4	4.041	22	7.81%
6	UBS	1.644	12	3.73%	9	1.553	13	3.00%
7	Credit Suisse	1.571	15	3.56%	6	2.462	19	4.76%
8	Barclays	1.562	13	3.54%	12	1.316	9	2.54%
9	Deutsche Bank	1.307	16	2.96%	8	1.802	13	3.48%
10	BNP	1.150	9	2.61%	13	0.610	7	1.18%
	Total	44.096	167	51.734	145
	Average size:	0.264	0.357
August, U.S. market
					2010 Comparables
	Underwriter	Amount	No.	Share	Rank	Amount	No.	Share
	Total	0.000	0	2.050	4
	Average size:	0.512
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 (for U.S. deals), or all underwritten offerings (global deals).

• 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 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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