Assured Guaranty edges up on debut, but Liz Claiborne quiet; HLTH paper adds on merger news

By Rebecca Melvin

New York, June 19 - Assured Guaranty Ltd.'s newly priced 8.5% mandatory convertible equity units edged up on their debut in the secondary market Friday to $50.75 versus a share price of $11.30 in late morning trade.

Liz Claiborne Inc.'s newly priced 6% convertible senior notes due 2014 were quiet on their debut with a 100.5 bid in the early going, but there were no trades reported.

One source said he heard an account bought the Liz Claiborne convertibles at 106 versus a share price of $3.25. But that level wasn't confirmed by other sources.

HLTH Corp. convertibles were still active at higher levels after merger news boosted the paper Thursday. Although one of the issues has takeover protection, and the other doesn't, the company doesn't believe that the merger triggers a change of control and the paper will remain outstanding, a spokesperson for the company told Prospect News.

New issuance for the week

In the primary market, new issuance continued to trickle in during the week. Although with a deal total of four, it was at a slower pace than the previous week.

In addition to Assured Guaranty and Liz Claiborne, McMoRan Exploration Co. priced 8% convertible preferred stock that was slightly higher in light trading on its debut Wednesday; and Whiting Petroleum Corp. priced 6.25% perpetual convertible preferred stock that slipped below par on its debut in the secondary Thursday.

Also during the week, four sizable deals priced overseas, including thee in Europe and one in Asia.

In Europe, Paris-based cable maker Nexans priced €190 million of 6.5-year convertible bonds in the Oceane structure within talk to yield 4% with an initial conversion premium of 30%.

Publicis Groupe SA priced €625 million of five-year convertible bonds in the Oceane structure to yield 3.125% with an initial conversion premium of 35.5%.

J Sainsbury plc priced £190 million of five-year convertible bonds, which priced beyond the aggressive end of talk for the coupon at 4.25%, compared to talk of 4.75% to 5.25%., and toward the middle of talk for the initial conversion premium, which was 33.7%, compared to talk of 30% to 35%.

In Asia, Yanlord Land Group Ltd. priced S$275 million of five-year convertible bonds to yield 5.85% with an initial conversion premium of 26%.

Assured edges up

The newly priced Assured Guaranty 8.5% mandatories traded up to $50.75 versus a share price of $11.30 on Friday after the Hamilton, Bermuda, credit enhancement provider priced $150 million of mandatory convertible equity units after the market close Thursday.

The registered units, with a stated amount of $50 per unit, came at the cheap end of talk, which was for a yield of 8% to 8.5% and an initial conversion premium of 17.5% to 22.5%.

Assured also priced 38.5 million shares at $11.00 each for a total of $423.5 million, upsized from $400 million. There is a greenshoe for a further 5.775 million shares.

There is a greenshoe for an additional $22.5 million of convertibles.

Merrill Lynch was bookrunner for the convertibles offering, and Merrill Lynch and Deutsche Bank were joint bookrunners of the stock offering.

Proceeds of the equity units will be used to pay cash in lieu of common stock for part of the purchase price of its acquisition of Financial Security Assurance Holdings Ltd. Most of the stock offering will also be used to pay the cash purchase price of the acquisition.

Liz mostly quiet

The newly priced Liz Claiborne 6% convertibles due 2014 were not seen in trade, according to several sources, including a syndicate source.

But one reported a 100.5 bid early on and one sellside analyst said he heard one account bought at 106 versus a share price of $3.25.

The retailer's paper modeled 0% cheap for one sellside shop, deriving a spread from the Liz Claiborne 5% paper and its credit default swap.

Shares of the New York-based women's apparel retailer bounced back some on Friday, trading up 29 cents, or 10%, to $3.27, after tanking 26% on Thursday.

The drop in the equities was associated with the company saying now that its second-quarter loss will be larger than expected. Last month, the company said that its losses were running on par with that of the first quarter.

Sales are expected to be flat with the $779.7 million reported in the first quarter.

A sellside analyst said the brand is not doing well.

Its trailing 12-month EBITDA was down 60% year over year, the company just amended its credit facility and now the company faces strict liquidity restrictions, and Liz Claiborne is raising capital, the sellsider said. So it's "not looking good."

The company priced $75 million of five-year convertibles after the market close Thursday at the cheap end of talk, which guided for a coupon of 5.5% to 6% and an initial conversion premium of 20% to 25%.

The Rule 144A offering has a greenshoe of $15 million, and the deal was sold via bookrunners J.P. Morgan Securities Inc. and Merrill Lynch.

The notes are non-callable and feature no puts except a change-of-control put.

Proceeds are to pay down temporarily a portion of outstanding borrowings under its amended credit facility.

HLTH adds on merger news

HLTH's 3.125% convertibles due 2025 extended gains Friday, trading up to 97.9, after moving up 3.5 points in heavy volume to 96.25 on Thursday.

HLTH's 1.75% convertible subordinated notes due 2023 weren't seen in trade on Friday but had also moved up to about 98.

"The 3.125 converts have takeover protection, and the 1.75% converts don't. But the company is acting like this doesn't trigger a change of control," a sellside analyst said.

The company spokesperson said that the 1.75% convertibles would be convertible for a short window of time prior to closing of the merger. And she reiterated that the company doesn't think the merger triggers a change of control.

WebMD Health Corp. will merge with parent HLTH in an all-stock deal in which WebMD will be the surviving company. According to reports, WebMD will assume the obligations of HLTH's 3.125% convertible notes and HLTH's 1.75% convertible subordinated notes, which will be convertible into WebMD common stock.

The merger resurrects a plan that was scuttled last October due to turmoil in the financial markets.

Mentioned in this article:

Assured Guaranty Ltd. NYSE: AGO

Liz Claiborne Inc. NYSE: LIZ

HLTH Corp. NYSE: HLTH

McMoRan Exploration Co. NYSE: MMR

Whiting Petroleum Corp. NYSE: WLL

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