Amerigroup, Lifepoint better after health care bill OK'd; Kaiser Aluminum offering on tap

By Rebecca Melvin

New York, March 22 - A pair of health care names continued to improve on Monday in the convertibles market a day after the House of Representatives passed health care legislation expected to be signed into law Tuesday.

The 219-212 vote approving the legislation eased the uncertainty that has been hanging over health care for more than a year. Now mandated, near universal health care could prove beneficial to hospitals and other entities in health care.

Managed health care provider Amerigroup Corp. was better Monday, a New York-based convertibles trader said. Molina Healthcare Inc., another managed care name in convertibles, wasn't heard in trade, however.

Lifepoint Hospitals Inc. saw continued action in its convertibles and was also stronger in a move that has extended for more than a week.

Ciena Corp.'s newish 4% convertibles, which priced earlier this month, were a little weaker from initial levels, trading at 102.5 versus a share price of $14.65, according to a New York-based sellside desk analyst, compared to nearly 105 versus a share price of $15.42 earlier in the month. Ciena completed its purchase of Nortel Networks' Ethernet assets on Friday.

Also in the telecom sector, Qwest Communications International Inc.'s 3.5% convertible senior notes were active and moving up in line with their underlying shares, extending gains notched on Friday - which was generally a down day for the markets overall, a New York-based sellside trader pointed out.

Meanwhile, Hartford Financial Services Group Inc.'s 7.25% mandatories continued to trade actively after pricing on Thursday. The mandatories looked a little stronger from where they went out on Friday.

Market generally quiet

Overall the market was quiet, sources said, and volume was slim. Investors were digesting the landmark health care legislation, and some foot dragging was expected.

"People are looking for ideas," one sellsider said. "Things have moved up so far, with people paying in."

The health care legislation finally gained the necessary votes to pass on Sunday after president Barack Obama promised Rep. Bart Stupak that he would sign an executive order ensuring that the government expenditures wouldn't be used to pay for abortions. Stupak, a Michigan Democrat, had been withholding a "yes" vote on the basis of that issue.

In the primary arena, Kaiser Aluminum Corp. launched a new deal after the session's close. The Foothill Ranch, Calif.-based aluminum products maker plans to price $130 million of five-year convertible senior notes late Tuesday.

Amerigroup, Lifepoint better

Amerigroup's 2% convertible senior notes due 2012 traded up to 102.625 on Monday, according to Trace data, and was later seen a little lower at 101.88, which was still up more than 2 points on the day. The paper has been bouncing around in the 95 or 97.5 area in recent weeks.

Shares of Virginia Beach, Va.-based Amerigroup gained $1.43, or nearly 5%, to $32.82 on Monday.

Early Monday, the convertibles traded at 100.48 versus a share price of $31.45 on a 35% delta, according to a sellside trader. The stock was upgraded Monday.

Amerigroup shares were upgraded to "buy" from "hold" by Collins Stewart, which cited passage of the health care bill as supportive of its recommendation.

A Collins Stewart analyst said he thinks the new law will bring a more than 30% increase in the expansion of the Medicaid population in the next four years.

Amerigroup is a multi-state managed health care company that focuses on serving people who receive health care benefits through publicly sponsored programs. It priced $240 million of 2% convertibles in 2007.

Lifepoint's 3.5% convertibles due 2014 jumped to par versus a share price of $37.25, which was better compared to 97.5 versus a share price of $35.80 last week, according to a sellsider.

Shares of the Brentwood, Tenn.-based rural hospital owner and operator gained $2.07, or nearly 6%, to $37.91.

Qwest active, higher in trade

Qwest's 3.5% convertibles due 2025 were last around 112 versus a closing share price of $5.17. That was up compared to an earlier trade at 110.5 versus a share price of $5.10, according to a sellside trader.

"The stock was up, and I saw a lot of activity in the straight," the sellsider said. "Things were moving around. It was up on a big down day on Friday, and today it opened a little softer and got stronger."

Shares of the Denver-based telephone services company added 15 cents, or 3%, on Monday, extending a 1% gain on Friday.

Hartford active, lower

Hartford Financial's 7.25% convertible mandatory preferreds traded at 25.35 versus a share price of $27.30, which was a bit higher compared to 25.25 versus a share price of $27.00 on Friday.

"It was a little higher. It opened up about 25 [cents] and just moved with the stock," a sellsider said.

Kaiser to price Tuesday

After the close of markets on Tuesday, Kaiser Aluminum is expected to price $130 million of five-year convertibles talked to yield a coupon of 4.5% to 5% with an initial conversion premium of 22.5% to 27.5%.

J.P. Morgan Securities Inc. and Bank of America Merrill Lynch are joint bookrunners of the deal, with Wells Fargo as co-manager.

The bonds, which have a $20 million greenshoe, will be non-callable for life with no puts.

Proceeds are expected to be used to repurchase $50 million of common stock concurrently with the offering, to purchase a call spread and for general corporate purposes.

In connection with the offering of the notes, Kaiser Aluminum also expects to terminate its $265 million existing senior secured revolving credit facility and enter into a new $200 million four-year senior secured revolver providing for borrowings based upon advances against eligible accounts receivable and eligible inventory. The new credit facility is expected to close simultaneously with the pricing of the convertible notes.

Mentioned in this article:

Amerigroup Corp. NYSE: AGP

Ciena Corp. Nasdaq: CIEN

Hartford Financial Services Group Inc. NYSE: HIG

Kaiser Aluminum Corp. Nasdaq: KALU

Lifepoint Hospitals Inc. Nasdaq: LPNT

Molina Healthcare Inc. NYSE: MOH

Qwest Communications International Inc. NYSE: Q

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