Navistar convertibles add with straight deal; Walter up with stock; Leap jumps after call

By Rebecca Melvin

New York, March 27 - Navistar International Corp.'s 3% convertibles were higher in trade Wednesday after the Lisle, Ill.-based heavy-duty truck maker priced $300 million of 8.25% senior straight notes due 2021 at 101.25 to yield 7.916%.

Walter Investment Management Corp.'s convertibles, which have been active of late, surged in tandem with the underlying shares of the Tampa, Fla.-based mortgage services company in response to a new loan modification program for troubled borrowers that helped boost the mortgage financing sector.

Also trading were Leap Wireless International Inc.'s convertibles, which have added after the San Diego-based wireless services provider announced Tuesday a call of the $250 million outstanding of 4.5% convertibles due 2014.

The Leap bonds were up about 0.75 point on Wednesday after trading a little higher on Tuesday, and both levels were higher than the price that Leap is proposing to pay holders that tender their bonds.

Elsewhere it was rather quiet with the session's notable feature being a lack of volume. Passover, Holy Week and spring vacations were cited for the slowdown, while month-end trading spurred a little bit of action. Financial markets will be closed Friday in observance of Good Friday.

"I think guys are doing a little bit of clean up and just getting ready for next week," a New York-based trader said.

"It's got to be busier next week," he said, referring to the new month getting under way post holidays.

There were no new issues launched or priced in the U.S. convertible primary market, but overseas, Spain's Obrascon Huarte Lain SA, priced an upsized €275 million of five-year bonds exchangeable into ordinary shares of Obrascon Mexico SAB de CV. Those bonds priced to yield 4% with a 25% initial conversion premium.

Equities ended mixed with the Dow Jones industrial average and the S&P 500 stock index finishing lower amid worries about possible knock on effects in the euro zone related to the Cyprus bailout. But the Nasdaq Composite index ended up a few points.

Navistar bumps up

Navistar's 3% convertibles due 2019 edged up with a trade notched at 102.25, which was up about 0.5 point in early afternoon. That level was still lower compared to last week when the paper traded up to 103.75 bid, 104.25 offered, against higher shares.

Navistar shares on Wednesday traded in both negative and positive territory and ended higher by 9 cents at $34.63.

The convertibles traded fairly actively, a trader said, and increased amid news that the Lisle, Ill.-based truck maker priced a $300 million add-on to the 8.25% senior straight notes due Nov 1, 2021. The bonds are callable on Nov. 1, 2014 at 104.125. And they were issued to repay a portion of its senior secured term loan facility in connection with its proposed amendment of that facility.

The original $1 billion issue priced at 96.328 to yield 8.25% in October 2009.

The new notes were seen in the secondary market at 101.25.

Walter 'rips' higher

Walter's 4.5% convertibles due 2019 jumped to 106 bid, 106.50 offered on Wednesday, which was up nearly 2 points on the day, according to Trace data. The trades were also up from 100 bid, 101 offered on Friday.

Shares of the Tampa, Fla.-based mortgage services company jumped $2.09, or 6%, to $37.04. That extended a turnaround from last week when the shares and the convertibles dropped on disappointing earnings.

"Walter ripped," a New York-based trader said. "It has to do with new loan modifications, and the whole industry is trading higher.'

The Federal Housing Finance Agency announced a new loan modification program that streamlines the process for helping troubled borrowers and enables them to stay in their homes.

The modifications will be put into effect in July and will allow borrowers to reduce monthly payments by about 30% on average if they become 90 days or more past due without having to document hardship.

Last week the convertibles dropped when shares skidded $8.61, or nearly 21%, to $32.98 after the company reported a quarterly loss but said it expects upcoming earnings to be ahead of expectations.

Leap jumps

Leap's 4.5% convertibles due 2014 traded up to 101.625 on Wednesday, which was up from 100.875 after the market close on Tuesday and after the company announced a cash tender offer to purchase any and all its $250 million of those convertibles.

"It's unusual that they would be up again," a New York-based trader said, referring to the fact that they were up Tuesday and again on Wednesday.

"But people immediately said they don't agree with the price the company is offering. It's not happening," he said.

Leap said it would pay $1,005 in cash for each $1,000 in principal value of the notes plus accrued and unpaid interest. The offer is subject to conditions including one that specifies that its Cricket Communications unit "shall have consummated the borrowing of term loans under its delayed draw incremental term loan facility.

The offer expires at midnight April 22.

Leap shares on Wednesday added 13 cents, or 2.3%, to $5.77.

"Considering the bonds were trading higher than where the company is offering to pay for them by over a point, I think the company is going to have to pay up a little more. No one is going to tender them at that price," the trader said.

Mentioned in this article:

Leap Wireless International Inc. Nasdaq: LEAP

Navistar International Corp. NYSE: NAV

Walter Investment Management Corp. NYSE: WAC

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