Large MetLife issue takes center stage; Transocean rises with higher oil prices; GM sags

Princeton, N.J., June 16 - MetLife's $1.8 billion of new convertibles - the largest new issue to hit the convertibles market in a year and a half - rose in early trade Thursday and remained firm to close up half a point at 25.50.

New York-based insurer MetLife Inc. sold $1.8 billion of mandatory convertibles, priced at 6.375% with an initial conversion premium of 22.5%, in the middle of price talk.

A buyside trader put the deal at between 2% cheap to 3% cheap and added the entire market seemed stronger on Thursday.

"I learned you had to lift an offer when you saw it today because I had a short and had to pay more than a point higher to cover it than I expected because I waited," the buyside trader said.

Meanwhile a second new issue that priced overnight played the phantom, with traders saying that they had not seen it. Oil States International Inc. said it agreed to sell $125 million of 2.375% contingent convertible senior notes due 2025. RBC Capital Markets was the bookrunner.

Separately, the convertibles of Invitrogen Corp. remained firm after the biotechnology company priced a $325 million new issue Wednesday. The deal's $25 million greenshoe was exercised Thursday.

The focus of morning trading was the MetLife issue, but a couple other names cropped up in the positive column including Leucadia National Corp., Viropharma Corp., and Transocean Inc. But UTStarcom was down as well as the convertible bonds of General Motors Corp., which retraced some of their recent gains.

MetLife issue lifts half a point

The MetLife issue of common equity units includes a 15% greenshoe, or $270 million, and is the largest deal since American Express Co. sold $2 billion of convertible notes in November 2003.

Price talk for the MetLife deal was 6% to 6.75%, with the initial conversion premium at 20% to 25%.

The new issue brought some crossover investors into the convertibles market, a New York sellside trader said. The units priced at par of $25 and gained half a point to end at 25.50.

The issue will mature in two stages due to its size. The first half will mature on Aug. 15, 2008, while the second half matures six months later on Feb. 15, 2009.

The joint global coordinators are Goldman Sachs & Co. and Banc of America Securities LLC. Joint bookrunners are Citigroup, Credit Suisse, First Boston, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS Investment Bank.

Shares of MetLife on the New York Stock Exchange closed up $0.54, or 1.25%, at $43.89.

Oil States missing in action

Meanwhile, a second new issue from Houston-based oil-services company Oil States apparently ran into some trouble Thursday, although one buyside trader reported the 2.375% convertibles were traded at 100.5 bid, 101 offered.

"This was marketed overnight and had to be resold at 99 because the stock was down this morning," the buyside traders said. But he said the issue of 20-year bonds was a sound issue, putting it at 3% cheap to 4% cheap, ant that it was handled with the same sensitivity to investors that has marked other new issues coming to market in these recently challenging conditions.

But a Connecticut-based trader said, "I think there were problems and it didn't sell."

RBC Capital Markets didn't return phone calls from Prospect News Thursday.

Oil States stock closed down $0.90, or 3.6%, at $24.45.

Leucadia rises on deal

Leucadia convertibles were up a couple of points on news that SBC Communications Inc. will pay network services provider WilTel Communications $236 million in cash and buy at least $675 million in services as part of a renegotiated contract.

WilTel is a wholly owned subsidiary of New York-based Leucadia. SBC renegotiated its contract with WilTel as part of its pending $16 billion purchase of AT&T Corp. SBC is WilTel's largest customer but plans to use AT&T's network for many of the services it buys from WilTel, which will now continue to provide long-distance voice and data services to SBC through 2009.

WilTel president and chief executive officer Jeff Story said in a news release that "SBC remains an important long-term customer."

"Everyone thought it would be very bad for WilTel, but this looks pretty good," a New York desk analyst said.

Leucadia's 3.75% convertible senior subordinated notes due 2014 rose to 103 bid, 104 offered, a New York sellside trader said. Leucadia shares were up $1.33, of 3.5%, to $39.15.

Invitrogen extends gains

Invitrogen convertibles remained strong or edged higher on Thursday after the biotechnology company's 2005 investors meeting and a day after the company issued new convertibles that saw healthy demand and pricing strength in the market.

The Carlsbad, Calif.-based company's executives told investors Thursday that the company's aim is to be as good a merchandiser as it is a developer of technology. It also plans to double its rate of organic growth in the next two years.

From 2002 to 2004, Invitrogen had a rate of organic growth of 4%, executives said. This year organic growth is expected to rise to 6% to 8%; and in 2006 the corporation wants to boost that rate to 8% to 10%.

Invitrogen's new 3.25% issue was seen at 102 bid, 102.75 offered, according to a New York trader, about a quarter of a point higher than the close at 102 bid, 102.5 offered on Tuesday. Its 1.5s were seen little changed at 95 bid, 96 offered.

Transocean gains on oil demand

The convertibles of Houston-based Transocean were better bid on Thursday as the stock of the drilling-services company rose along with a raft of other energy-related shares.

The shares were lifted by a rise in crude oil to its highest level in more than two months amid signs that surging global fuel consumption will strain the production capacity of the Organization of Petroleum Exporting Countries and other exporters.

Fourth-quarter demand will average 85.91 million barrels a day, according to a monthly OPEC report.

Crude oil for July delivery rose $1.01, or 1.8 percent, to $56.58 a barrel on the New York Mercantile Exchange, the highest close since April 4. Futures have fallen 2.9 percent from the intraday record of $58.28 a barrel on April 4. Prices are up 52 percent from a year ago.

Transocean's 1.5% convertible debentures due 2021 were seen slightly higher compared with a recent level of 98.972 bid, 99.472 offered. Its shares were up $0.92, or 1.65%, at $56.76.

But UTStarcom Inc. convertibles slipped as its share price dropped 7%. No new news could be pinpointed, a sellside trader said Thursday. But on Tuesday, a man who was making threats against the employees of the Alameda, Calif.-based maker of telecommunications equipment was arrested. The threats were an attempt to manipulate the company's stock price, according to the U.S. Attorney for the Northern District of California.

UTStarcom's 0.875% convertible traded down a couple of points compared with its 68.365 bid, 68.865 offer close on Wednesday, the sellside trader said. UTSarcom's shares were down $0.60, or 7.1%, to $7.80.

Carnival convertibles unmoved

Traders didn't report any activity for Carnival Corp.'s convertibles after the Miami-based cruise company reported a record 23% jump in quarterly earnings and record revenue. The company's stock lifted 4.4%.

The profit and sales increase was driven by higher cruise ticket prices and, to a lesser extent, higher occupancy and the weak dollar relative to the euro and sterling, the company reported Thursday.

The company's 2% convertible senior debentures due 2021 closed Wednesday at 135.87 bid, 136.37 offered. Its 1.3204% convertible was at 77.428 bid, 77.928 offered; and its 0% convertible due 2021 was at 86.587 bid, 87.087 offered.

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