Tektronix, Ixys launch new deals; Charming Shoppes drops; CVRD rises; ADM quiet

By Evan Weinberger

New York, June 25 - Even a couple of new deals - a $300 million issue from Tektronix Inc. and a $60 million offering from Ixyx Corp. - failed to generate much buzz in the convertibles market Monday.

Overall volume was low, according to one sell-side analyst, and that was to be expected. "It's a summer Monday," the analyst said on the first official day to match that description.

News of the potential closing of two Bear Stearns hedge funds heavily invested in subprime mortgages did little to hurt mortgage real estate investment trust Luminent Mortgage Capital Inc., one sellside analyst remarked, nor is the event expected to have much impact on the broader REIT sector, which has been a hot convertible issuing group this year and going back into last year.

"I don't think it's going to affect REITs," the analyst said. "It's pretty opaque. It's something the general public will say, 'I don't like what they're doing.'" But, he added, the hedge funds were not involved in any actual real estate properties.

Luminent's 8.12% convertible, issued in February, was described as active and trading up with the underlying stock. The issue was pegged closing at 98 bid, 99.25. The stock (NYSE:LUM) closed up 4.5% at $9.85, a gain of $0.43.

Charming Shoppes Inc., however, traded down as bad news continued to pile up for the struggling apparel retailer.

Companhia Vale Do Rio Doce SA saw some action in its new convertible with investors seeing it as a way to gain exposure towards commodities. A sell-side analyst said that mining companies and the underlying commodities could provide some respite in a volatile equities market.

"A lot of times when equities are down, people are looking to pile into commodities," he said. "We did a fair amount of business in this as well."

The Dow Jones Industrial Average dropped 8.21 points on Monday to 13,352.05, a drop of 0.06%. The Nasdaq lost 11.88 points to 2,577.08, down 0.46%.

Nabors Industries Ltd. was another active name, trading at 102.5 versus 90.5 on the stock price. The oil and gas drilling and exploration firm (NYSE:NBR) closed down 2.48% at $34.22, although there was a slight rise in after-hours trading. The company has been rumored to be a takeover target for some time.

Archer-Daniels-Midland Co. saw limited action on its recently-issued convertible even with passage last week of the Senate energy bill.

Tektronix prices at mids

Tektronix priced $300 million of five-year convertible senior notes on Monday to yield 1.625% with an initial conversion premium of 15%. The convertibles were offered at par.

The issue priced at the mid-point of price talk that called for a yield of 1.5% to 1.75% and an initial conversion premium of 12.5% to 17.5%, following a one-day marketing period. The deal was launched early Monday, following a one-day marketing period. The deal was launched early Monday.

There is an over-allotment option for a further $45 million.

Merrill Lynch and Goldman Sachs were joint bookrunners of the Rule 144A offering.

The senior notes are non-callable. There are no puts.

The Beaverton, Ore.-based electronics testing equipment company said proceeds would be used to repurchase $110 million worth of shares of stock concurrent with the offering.

In addition, $26.6 million is earmarked for convertible note hedge and warrant transactions to minimize the dilutive effects of the offering. Tektronix said the warrants will have an exercise price that will have the effect of increasing the conversion price of the notes to $49.26 per share - a 42.5% premium.

Ixys deal to price Tuesday

Ixys launched $60 million of 20-year convertible senior unsecured notes talked to yield 3.5% to 4.0% with an initial conversion premium of 27.5% to 32.5%. The issue is scheduled to price after the market close Tuesday.

There is an over-allotment option for a further $15 million.

Thomas Weisel Partners is bookrunner of the Rule 144A offering.

The convertible is non-callable for seven years. There are puts in years seven, 10 and 15.

The issue offers standard dividend and takeover protection. There is no net share settlement feature.

Santa Clara, Calif.-based Ixys expects to use proceeds to repurchase $20 to $30 million of shares concurrently with the offering and the remainder for general corporate purposes, which may include acquisitions.

The company is a specialized semiconductor firm focused on power semiconductors, radio frequency power transistors and systems and digital and analog integrated circuits.

ADM convertibles flat

News out of Washington regarding Thursday's passage of the Senate energy bill did little to move the billion-dollar convertible from ADM priced earlier this year. The bill, which calls for increasing fuel efficiency to 35 miles per gallon for all cars in the United States by 2020, still faces a fight in the House and president Bush's views on the bill are still unclear.

Some thought that the increase in reliance on alternatives to gasoline would be a boon to agricultural companies like ADM. The bill calls for increased use of alternatives to gasoline, including ethanol. But that has not so far been the case.

"It's a huge agricultural, global company," a sell-side analyst said, adding that alternative fuel production was just a part of the conglomerate's business. The analyst also said that ADM may be moving into Brazil, which has a booming biofuels sector.

The analyst said there wasn't much activity on ADM's convertible. It was trading at 951 versus $33.60 for the stock. The stock (NYSE:ADM) closed down $0.44 or 1.31% at $33.04.

Bad news hurts Charming

Charming Shoppes continued its downward path on Monday.

The struggling women's apparel retailer, which owns brands including Lane Bryant, Fashion Bug, Fashion Bug Plus, Catherines Plus Sizes, Lane Bryant Outlet and Petite Sophisticates, announced that its second quarter earnings would fall short of earlier projections.

The Bensalem, Pa.-based company lowered its earnings guidance to 18 to 20 cents per share, down from an original estimate of 25 to 27 cents. For the year, the company expects earnings for the fiscal year, which ends Feb. 2, to be at 80 to 82 cents per share, down from an original estimate of 86 to 90 cents per share.

The company also announced that LuAnn Via would take over as divisional group president for the Lane Bryant and Cacique lines. She takes over from Lorna Nagler, who had been the division's head since 2004. Via had been the divisional group president of the Catherines brand. Charming Shoppes says that it is still searching for a new president for the Catherines brand. Charming Shoppes owns 2,409 retail outlets.

Traders said the Charming Shoppes convertible was weaker with the stock (Nasdaq: CHRS), which lost 5.59%, closing at $10.98.

Ronda Fears contributed to this article

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