Market hushed by nervous anticipation of non-farm payroll data

By Sara Rosenberg

New York, May 6 - Market participants spent time wondering and worrying over what Friday's non-farm payroll number would bring and just how much the results would affect interest rates, creating an overall quiet tone in the convertibles market.

"Pretty much everybody is in a wait-and-hold pattern until tomorrow [Friday]," an analyst explained. "Clearly the [equity] market weakness is probably reflecting interest rate worries and the number could be larger than the average 150,000 people are expecting. The market appears to be trading off ahead of a possible stronger number tomorrow.

"Oil prices have people worried too. It's the same theme. We're just one day closer to numbers so people are more jittery."

Cooper Cameron well received

Cooper Cameron Corp.'s newly sold upsized offering of $230 million 20-year convertible senior debentures was well received by the market and the deal found itself "pretty well oversubscribed" despite aggressive pricing, according to a market source.

The convertibles priced at par to yield 1.5% with a 41% initial conversion premium.

The Rule 144A deal, which was originally expected to be sized at $200 million, priced at the rich end of yield talk for a 1.5% to 2.0% coupon and closer to the aggressive end of premium guidance of 37.5% to 42.5%.

The decision to upsize the convertible offering was based on two primary drivers - one was strong market reception and the other, more importantly, was the company's indication to potential investors that if more convertibles were received in its recently extended tender offer then the new issue would be upsized to account for the extra tenders, the source explained.

This past Tuesday, the company extended its cash tender offer to purchase any and all of its $200 million 1.75% convertible senior debentures due 2021. The tender was extended to 3 p.m. ET on Wednesday instead of 9 a.m. ET on Wednesday. As of 3 p.m. ET on Tuesday, holders had tendered $141.455 million principal amount of the securities. With the extension, the response increased to $184.25 million.

The Houston manufacturer of oil and gas pressure control equipment offered to pay par plus accrued interest up to but not including the payment date.

A large portion of the proceeds from the new 1.5% convertible offering are being used to purchase any outstanding 1.75% convertible senior debentures tendered and for general corporate purposes. Approximately $46 million of proceeds are being set aside to buy back stock sold short by note buyers.

UBS and Citigroup Global Markets Inc. were joint bookrunners on the deal.

During its first day of trading, the paper started off pretty active with trades taking place above par - somewhere around the par 1/8 to par 3/8 or par ¼ to par ¾ contexts, the source said.

However, once people finished scrambling around to either get rid of their positions since they were too small to really be bothered with or increase their positions to make the investment worthwhile, the paper settled down at around par bid, par ¼ offered, the source continued.

"At least in terms of valuations, the fact that the bonds traded at par was pretty unbelievable given pricing was aggressive," the source added.

Nextel down on redemption

Nextel Communications Inc.'s 6% convertible senior note due 2011 saw "some activity" following the company's announcement that it would redeem all of the approximately $608 million in principal amount of the outstanding notes.

The 6% convertible closed down "about a point on the swap" at 107¼ bid, 108¼ offered, according to a trader. The company's 5¼% convertible closed basically unchanged at par bid, 101 offered, the trader added. The stock closed at $24.84, down $0.27 or 1.08%.

The notes will be redeemed at 104% of par plus accrued interest. The redemption date for the notes has been set for June 7.

However, noteholders can opt to convert the principal of their notes into class A stock at the $23.8375 conversion price.

Nextel is a Reston, Va. wireless communications services company.

Conseco, Capital Automotive to come

Coming up after close Thursday, Conseco Inc. is scheduled to price $500 million of three-year mandatory convertible units with price talk for a 5.5% yield and a 22% initial conversion premium, revised from original guidance of a 5.75% to 6.25% dividend and a 18% to 22% initial conversion premium.

Goldman Sachs & Co. and Morgan Stanley are joint bookrunners. J.P. Morgan is co-manager.

The Carmel, Ind.-based insurance company is also selling $1 billion of common stock. Goldman Sachs & Co. and Morgan Stanley are joint lead managers. Banc of America Securities is co-manager of the stock offering.

Conseco filed a registration statement on the offering in late January. At that time, the company planned $350 million of mandatory convertibles and $800 million of common stock. The registration statement was later amended.

The mandatory is callable with a 150% threshold and has a make-whole provision for dividend payments. Par on the issue is $25.

Proceeds are earmarked to take out its $859.7 million of 10.5% step-up payable- in-kind convertible preferreds, pay on its senior credit facility - which matures in 2009 and currently has a weighted average interest rate of 7.8% - contribute capital to subsidiaries and for general corporate purposes.

Capital Automotive REIT $100 million convertible notes due 2024 are scheduled to price after the close on Thursday. The convertibles are talked to yield 5.5% to 6.0% with a 28% to 33% initial conversion premium, according to a market source.

Credit Suisse First Boston is the sole manager of the off-the-shelf offering.

Capital Automotive is a McLean, Va., real estate investment trust that acquires real property and improvements used by operators of multi-site, multi-franchised automotive dealerships and related businesses.

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