Convertibles market eyes new issues from NuVasive, Central European; Thornburg drops

By Rebecca Melvin

New York, March 3 - Convertible bond players on Monday were eyeing two deals that were launched early in the session and a third that turned up after the close.

The early ones were for $310 million of five-year convertible bonds from Central European Distribution Corp., which makes vodka and distributes beer and alcoholic beverages, and for $200 million of five-year convertible bonds to be sold by NuVasive Inc., a San Diego-based medical device maker.

Both were seen pricing after the close, and no gray market was reported during the session.

Another deal from central Europe was announced after the close, taking some people by surprise. "I looked at it, and at first I thought it was the same deal [as this morning]," a sellside analyst said.

This one though was for $425 million of five-year convertible bonds from Central European Media Enterprises Inc., a television company.

Meanwhile, Thornburg Mortgage Inc.'s 10% convertible preferred shares lost ground through the session, closing down about 10 points, and its 7.5% preferred shares lost about 5 points, as their common stock skidded more than 50% to $4.32 after the mortgage company said it would have to sell assets or raise capital to stay in business after more margin calls.

Intel Corp.'s 2.95% convertibles found better outright buyers, a New York sellside analyst said, after a Barron's story cited the chip giant as a weak-dollar play due to its strong exports.

China Petroleum & Chemical Corp. 0% convertible bonds due 2014 changed hands, and Health Management Associates Inc. was little changed after the company said that it would retire about half of its $575 million of outstanding 4.375% convertibles.

Overall trading volume was thin throughout the session. "It was hard to find a bid for anything," a New York-based sellside trader said.

NuVasive seen cheap

The $200 million of five-year convertible bonds from NuVasive were talked at a coupon of 2.25% to 2.75% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

The deal was seen slightly cheap to fair value, using a credit spread in the range of 700 basis points to 800 bps over Libor and a volatility in the area of 38%.

But one New York buysider acted less than excited due to it not being a big enough issue.

The Rule 144A deal has a greenshoe of up to $30 million, and JPMorgan and Goldman Sachs are bookrunners.

The deal was expected to price after the close Monday.

NuVasive, a medical device company focused on developing products for minimally disruptive surgical treatments for the spine, plans to use proceeds for general corporate purposes, including potential strategic acquisitions.

NuVasive shares (Nasdaq: NUVA) fell $3.45, or 9%, to $35.09.

Two issues from central Europe

The $425 million of bonds that Central European Media Enterprises plans to price Tuesday after the close were talked to yield 3% o 3.5% for the coupon, with an initial conversion premium of 25% to 30%.

There is an over-allotment option of up to $50 million.

Lehman Brothers, JPMorgan and Deutsche Bank are joint lead bookrunners.

Proceeds are expected to be used to purchase additional ownership interests in the company's operations in Ukraine and for general corporate purposes.

Shares of Central European Media (Nasdaq: CETV) closed up 84 cents, or 1%, at $92.76, but they dropped about 5% in after hours trade.

Hamilton, Bermuda-based Central European Media invests in and operates national and commercial television channels and stations in central and Eastern Europe.

Meanwhile, Central European Distribution planned to price $310 million of five-year convertible notes, which were talked to price at 2.5% to 3% with an initial conversion premium of 27.5% to 32.5%, according to a market source.

Using a spread of about 700 bps over Treasuries and volatility in the 40% range, the bonds modeled about 4% cheap, according to one sellside analyst.

The analyst said that the distributor of beer, wine, and liquor had proposed acquisitions over the last eight months that were expected to bolster its bottom line.

If the expansion into Russia works, the analyst said, its already solid stock has a lot of upward potential. "It's a unique story."

Shares of the company (Nasdaq: CEDC), which hit a high in the middle of last week, had been moving down from that level since the company reiterated guidance for 2008 that was below expectations. On Monday, they closed at $52.44, down $5.74, or 10%.

JPMorgan is the bookrunner of the notes, which will be distributed under a shelf registration.

Central European Distribution's base of U.S. operations is Bala Cynwyd, Pa.

Thornburg falls hard

Thornburg's 10% F convertible preferred shares traded early at about 12 and moved down to 10.5 before closing at about 11, as its shares slid more than 50%.

The Santa Fe, N.M.-based mortgage lender specializes in jumbo and super-jumbo adjustable-rate mortgages and said that margin call troubles that hit in mid-February have persisted.

Last week the company said the mortgage industry remained under pressure as the value of mortgage assets held by banks and broker-dealers continued to deteriorate. It also cited downgrades by rating agencies and the reluctance of banks to finance mortgage securities in the Reverse Repurchase Agreement and other mortgage financing markets was hurting the sector.

The 10% convertible preferred shares, which had an add-on in January, closed at 11 versus a stock price of $9.76. That compared to a close on Friday of 21.983 versus a share price of $11.54.

The Thornburg 7.5% convertible redeemable preferred shares closed at 11.46 compared to 16.44 on Friday.

Thornburg shares (NYSE: TMA) fell $4.58, or 51.5%, to $4.32 on Monday.

Health Management little changed

The 1.5% convertibles due 2023 of Health Management closed at 99.4, versus a share price of $5.45 on Monday, little changed versus a share price of $5.35 on Friday after the company said that it will retire about half of its $575 million of outstanding 4.375% convertible senior subordinated notes, which bondholders have the right to put to the company on Aug. 1.

Robert E. Farnham, Health Management's chief financial officer, told investors during a presentation at the Raymond James 29th Annual Institutional Investors Conference in Orlando, Fla., on Monday that the company will look to refinance the remaining portion of the debt by issuing a new convertible into the market or exchanging a new convertible for the old one with some of its existing bondholders.

Health Management is a Naples, Fla.-based hospital operator. Its shares (NYSE: HMA) closed down 2% on Monday.

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