Navistar, Dole Food notes slip on their debuts; GMX adds but mostly quiet; Jefferies flat

By Rebecca Melvin

New York, Oct. 23 - Navistar International Corp.'s upsized $550 million of five-year convertibles, which priced to yield 3% with an initial conversion premium of 35%, traded as high as 102.5 on its debut in secondary market dealings Friday but later slipped below par as its shares eased.

Dole Food Co. Inc., which priced $300 million of trust-issued mandatory exchangeables after the close Thursday, traded down slightly on its debut Friday, in line with the performance of its concurrent initial public offering.

GMX Resources Inc.'s $75 million of six-year convertibles, which priced at a 4.5% coupon with an initial conversion premium of 25%, was not widely traded. But a syndicate source said it popped to 108 out of the gate. Later it was somewhat lower in tandem with a 6% drop in the company's underlying shares.

A syndicate source saw the relative weakness in the new issues as a function of underlying share performance and also mentioned that the Jefferies Group Inc. $300 million deal that priced late Tuesday was hurt by its "aggressive structure" and by the fact that it was an overnight deal.

On Friday, Jefferies' new 3.875% convertibles were steady in trade at 99.75 versus a share price of $27.65.

Omnicare Inc.'s 3.25% convertibles due 2035 traded at 79.625 Thursday, which was down almost a point, but the paper wasn't seen in trade on Friday. The lack of movement came despite a move up in its underlying shares on news the Covington, Ky., provider of geriatric pharmaceuticals has hired HealthSouth Corp. chief financial officer John Workman to fill its CFO position.

Workman replaces Omnicare CFO David Froesel, who earlier this year announced plans to retire.

The market in the Omnicare 3.25% convertibles on Friday was 80 bid, 81 offered versus a share price of $22.50, according to a New York-based sellside desk analyst.

Primary sees $1.4 billion

The U.S. convertible bond market saw $1.4 billion of new issuance in five deals in the past week, an improvement from the previous week when there was only one new deal for $500 million.

The batch of new issues released for secondary trading on Friday met with mixed reviews as their underlying stocks slipped amid general weakness in equities.

Internationally, eight new issues priced during the week, according to Prospect News data, with four of those deals pricing in Europe.

Of note was Adecco Group's CHF 900 million of three-year mandatory convertibles, which priced at par to yield 6.5% with a 20% initial conversion premium. The Swiss-based human resources company's bonds priced at the cheap end of talk.

Also in Europe, Celesio Finance BV, a subsidiary of Celesio AG, priced €305 million of five-year convertible senior unsecured bonds on Tuesday - the upper range of €265 million to €305 million - to yield 3.75% with an initial conversion premium of 25%.

The bonds of the German pharmaceutical products and services company priced at the rich end of talk.

Trading in equities turned choppy this week amid lagging volatility, which has been weakening through October, a sellsider noted.

"Vol. is falling; stocks are not moving off their standard deviation. What we really need is a big drop in equities without a concurrent credit blowout. But that's not going to happen, given that it's a very financially driven market," a Connecticut-based sellside analyst said.

Navistar reaches 102.5, slips

Navistar's newly priced 3% convertibles due 2014 traded up to 102.5 early in the session Friday but were seen marked at 99.875 bid, par offered by early afternoon, amid lower shares, which were $35.41, down 5%, at the session's end.

The paper, which priced at the rich end of revised talk, was seen cheap in the gray market ahead of pricing.

"It traded quite a bit more on the open; now it's significantly less," a New York-based sellside trader said.

Warrenville, Ill.-based Navistar, a maker of commercial trucks, was the only rated new issue other than Jefferies that priced during the week. Navistar is rated BB- by Standard & Poor's; and Jefferies is rated BBB.

Convertibles players have been saying that the market needs BB rated or better new issuance to stimulate activity. But a syndicate source disagreed, saying that he thought the market had been receptive to a variety of new issues, and this week was a good example of the wide variety of deals that the convert space has seen.

GMX mostly quiet, jumps

GMX Resources' newly priced 4.5% convertible due May 1, 2015 jumped up to 108 on the open. And its concurrently priced stock, which priced at $15.00, opened up from pricing at $15.80. But later the equities slipped back to $15.24.

The bonds were not actively traded due to the smaller issue size of $75 million of bonds.

The convertible senior unsecured notes will be non-callable for three years with no puts. They will have standard dividend and takeover protection and will have contingent conversion at a price trigger of 130%. The paper will rank pari passu with its 5% convertibles due 2013.

Oklahoma City-based GMX is an oil and gas exploration and development company

Dole mandatories slip

Dole Food's newly priced 7% trust-issued mandatory exchangeables were quoted at 12 bid, 12.25 offered, which was down slightly from issue, as was the common stock.

Like Jefferies, the structure was out of the ordinary. It was considered a novelty given that it was coming with an IPO.

The initial public offering of shares came lower than expected at $12.50, and not the $13.00 to $15.00 per share seen earlier.

The convertibles came at the mid-point of talk, and there was no gray market ahead of final terms for this Rule 144A deal - another thing that was unusual given that the IPO was registered.

"I think that was the first concurrent IPO that the convert market has seen," a New York-based syndicate source said.

Dole Food is a Westlake Village, Calif.-based fruit and vegetables company.

Mentioned in this article:

Adecco Group SIX Swiss: ADEN

Celesio AG Xetra: CLS1

Dole Food Co. Inc. NYSE: DOLE

GMX Resources Inc. Nasdaq: GMXR

Jefferies Group Inc. NYSE: JEF

Navistar International Group NYSE: NAV

Omnicare Inc. NYSE: OCR

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