LDK Solar eases on shelf filing; Steel Dynamics better hedged; Take-Two gains; LodgeNet quiet

By Kenneth Lim

Boston, June 22 - Recent new issues dominated trading in the convertibles market on Monday while a small deal in the primary market saw limited interest, market sources said.

LodgeNet Interactive Corp. announced plans to price $50 million of convertible preferred stock on Tuesday after the market closes, but the small offering and the company's small market capitalization failed to attract many looks, sources said.

LDK Solar Co. Ltd. eased slightly after the company filed a shelf registration, but an analyst said it was too early to know if there will be any significant impact on the convertibles.

After the close, Rambus Inc. and Alliance One International, Inc. said they will offer five-year convertible notes. Pricing is set for Tuesday and Thursday, respectively.

Quiet beginning

The market in general had a slow start, traders said.

"Volume is extremely light," one sellsider said. "It's Monday in the summer and a lot of guys are out."

Another trader called the slow trading a "typical Monday."

The recently issued Take-Two Interactive Software Inc. 4.375% convertible senior notes due 2014 were up with the stock at 103.75 against a common stock price of $8.75. Take-Two common stock closed at $8.73, up by 3.19% or 27 cents.

Take-Two is a New York-based game software developer.

Steel Dynamics Inc.'s 5.125% convertibles due 2014 fell outright but were slightly better on a hedged basis after the company guided for a second-quarter loss.

The convertibles traded at 105.625 versus a stock price of $13.90, down about 7 points outright. The common stock dropped 10.69%, or $1.65, to close at $13.79.

Steel Dynamics, a Fort Wayne, Ind.-based steel producer and metals recycler, said June 19 that it expects a second-quarter loss of 10 to 15 cents per share. But a sellside convertible analyst said the loss was not a big surprise.

"I guess people maybe were surprised that it was as big as they're guiding for, but people were already expecting a loss," the analyst said. "But the other part of that announcement was they see improvement after the quarter, so that might be a positive sign. The converts are still doing OK."

LodgeNet quiet in gray

LodgeNet plans to price $50 million of series B perpetual convertible preferred stock Tuesday after the market closes with price talk at a dividend of 8% to 9% and an initial conversion premium of 10% to 20%, market sources said.

LodgeNet common stock fell 21.81%, or 99 cents, to close at $3.55 on Monday.

There is an over-allotment option for an additional $7.5 million.

Bank of America/Merrill Lynch is the bookrunner for the Rule 144A offering.

Proceeds will be used to reduce the outstanding balance on a term loan and for general working capital.

LodgeNet is a Sioux Falls, S.D.-based provider of interactive media and connectivity solutions to the hospitality industry.

The gray market ignored the small deal, and the offering will probably not be closely watched, a sellside convertible trader said.

"Nothing in LodgeNet," the trader said. "It's a small deal; nobody's going to say a word."

One observer noted that the company will be raising more than half of its market capitalization, which stood at about $79.8 million as of end-Monday. Those proportions could limit hedged interest.

One sellsider said: "Any stock under $5 can be hard to borrow. Optically it looks very cheap, but things are cheap for a reason."

LDK slips after shelf filing

LDK's 4.75% convertible due 2013 eased about a point outright to trade at 66 versus a common stock price of $10.25 on the back of a shelf registration by the company.

LDK common stock was 11.63%, or $1.28 lower at the close on Monday, settling at $9.73.

LDK is a Jiangxi, China-based maker of multicrystalline solar wafers.

The company filed an automatic shelf registration on June 19. The registration covers ordinary shares, preferred shares, debt securities, guarantees of debt securities, warrants, options or other rights, stock purchase contracts and equity-linked securities. The securities may be convertible.

A shelf registration suggests that the company wants to raise capital, but that may not be a problem for hedged holders if the company issues equity, the analyst said.

"If you're hedged, you're going to be better dollar-neutral," the analyst said.

But the analyst said the shelf registration alone does not have enough information to clearly move the convertible either way.

"You don't even know what they're going to use the proceeds for," the analyst said. "They could be trying to take out these converts before they're put in 2011."

Rambus, Alliance One plan deals

Rambus plans to price $150 million of five-year convertible senior notes on Tuesday after the market closes, with price talk at a coupon of 5% to 5.5% and an initial conversion premium of 17.5% to 22.5%.

The notes will be offered at par.

Rambus common stock closed at $17.83 on Monday, lower by 4.65% or 87 cents.

Credit Suisse Securities (USA) LLC and J.P. Morgan Securities Inc. are the bookrunners of the registered offering. There is an over-allotment option for an additional $22.5 million.

Proceeds will be used for general corporate purposes, which may include financing strategic investments, repaying a zero-coupon convertible due February 2010 and funding working capital.

Rambus is a Los Altos, Calif.-based designer of chip interface technologies and architectures.

Alliance One has a $100 million offering of five-year senior subordinated convertible notes slated for sale Thursday after the market closes, market sources said.

Price talk has not been set and is expected to be announced Wednesday.

Credit Suisse, Deutsche Bank and Goldman Sachs are the bookrunners of the Rule 144A offering. There is an over-allotment option for an additional $15 million.

Alliance One is concurrently offering $600 million of seven-year senior notes.

Proceeds of both deals will be used to finance a cash tender offer for outstanding debt due 2011 to 2013, to fund convertible note hedge transactions, to repay a $305 million senior secured credit facility and for other general corporate purposes.

The tender offers were made on June 9 and are conditional upon the completion of the new note and convertible note offerings.

Alliance One is a Morrisville, N.C.-based leaf tobacco merchant.

Mentioned in this article:

LodgeNet Interactive Corp. Nasdaq: LNET

LDK Solar Co. Ltd. NYSE: LDK

Rambus Inc. Nasdaq: RMBS

Alliance One International, Inc. NYSE: AOI

Take-Two Interactive Software Inc. Nasdaq: TTWO

Steel Dynamics Inc. Nasdaq: STLD

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