Hartford eases with stock; Lifepoint, other health care names steady to stronger; Rovi slips

By Rebecca Melvin

New York, March 19 - Trading in Hartford Financial Services Group Inc.'s $500 million issue of convertible mandatory preferreds remained active Friday following the issue's debut Thursday, and continued to provide the centerpiece of U.S. convertibles market action for the session.

The Hartford Financial 7.25% mandatories pulled back a bit in tandem with their common stock after dropping out of the chute Thursday higher in heavy action. Pricing had lost a little steam with the common stock coming under pressure as Thursday's session progressed.

Investors continued to eye headlines coming out of Washington on health care legislation. Convertible names like Lifepoint Hospitals Inc. and Health Management Associates saw their underlying stocks add consistently over the past five sessions, helping pull convertible prices higher.

Omnicare Inc. and Molina Healthcare Inc. were two other convertible names that were seeing action presumably tied to health care legislation, which was looking more like it would see a vote on Sunday and be passed.

"A vote on health care is looking more and more likely for Sunday so any surprise will be reflected in the stocks come Monday," a New York-based sellside trader said.

Rovi Corp., which priced $460 million of 2.625% convertibles last week, looked a little weaker on a dollar-neutral basis as shares of the Santa Clara, Calif.-based digital entertainment technology solutions company slipped just 1% from last Friday.

The Rovi 2.625% convertibles traded Friday at 101.75 versus $37.50, and a week ago it traded at 102.5 versus $37.70 and on Monday it traded at 102.25 versus $37.70.

Overall, trading in the convertibles market was fairly quiet, sources said, with activity hampered by many market players' focus on the NCAA basketball championship, which continued Friday.

"It's the best time of the year, other than Christmas, if you're a fan," a Connecticut-based sellside analyst said of the March basketball games.

Sweden's SAS prices deal

SAS AB's upsized SEK 1.6 billion of five-year convertible senior unsecured bonds looked attractive and could benefit from a proposed rights issue of stock, a London-based analyst said.

"It looks attractive at the mids," the analyst said ahead of pricing. "It's got a favorable story in terms of credit and the underlying shares."

The deal priced with a coupon of 7.5% and an initial conversion premium of 30%. Price talk on the deal was at a coupon of 7.5% to 8.5% with an initial conversion premium of 25% to 30%.

The size of the offering was originally SEK 1.42 billion.

J.P. Morgan is the bookrunner of the Regulation S offering.

Proceeds will be used to help refinance SEK 2 billion of debt due 2010. The offering will also enable SAS to carry out a SEK 5 billion preferential rights issue of stock, subject to shareholder approval.

SAS, a Solna, Sweden-based airline, could be an improving credit story, the analyst said.

"They've just made a deal with the unions and they are aggressive cost cutters," the analyst said. "The proceeds from this convertible issue is going to help pay off shorter maturity debt. They're coming off a lot of momentum, and I would say there's an optimistic outlook on the underlying credit."

If the company can raise an additional SEK 5 billion through a rights issue, that should be positive for the convertibles as well, the analyst said.

"They're going to add an additional SEK 5 billion to their books by selling shares," the analyst said. "That can only be good for the convertibles."

Hartford remains active, lower

Hartford Financial's 7.25% convertible mandatory preferreds traded at 25.25 versus $27 on Friday, which compared to Thursday's debut of 25.70.

Pressure on the common stock of the Hartford, Conn.-based financial services company was blamed for the dampened mandatory pricing. On Friday, the common shares ended down 58 cents, or 2%, at $27.26. On Thursday, the commen ended lower by 2.6%, or 76 cents.

On Thursday the new mandatory convertibles were seen as high as 27.70 bid, 26.10 offered.

Several sources said it was an active name on Friday.

Lifepoint, other health names in focus

Lifepoint's 3.5% convertibles due 2014 were seen closing up around 97, which was flat to slightly higher on pricing on Thursday. The Lifepoint 3.25% convertibles due 2025 were seen closing strong at about 95.

Shares of the Brentwood, Tenn.-based rural hospital owner and operator settled up 22 cents at $35.84.

The common shares have been edging up in expectation of health care reform legislation. The Lifepoint 3.5% paper was very active trading at 97 on Thursday versus a share price of $35.82 on a 50% delta, and later at 97.25 versus $32.82.

A sellsider said that vol. has been coming in on Lifepoint as the stock has moved up.

In addition both Molina Healthcare and Omnicare were showing vol. declines.

A second sellsider said that the broader coverage of health care should provide benefits that exceed any detrimental affect on Medicaid and hospital names like Lifepoint and Health Management and Molina Healthcare should do very well if the legislation to overhaul health care is passed.

Molina Healthcare's 3.75% convertibles due 2014 were seen steady at 89.60, while shares of the Long Beach, Calif.-based managed care organization ended little changed at $24.65.

Health Management 3.75% convertibles due 2028 were seen little changed at 104, versus a share price of $8.13, which was up 3 cents on the day.

Health Management is a Naples, Fla.-based rural hospital owner and operator.

Meanwhile, Omnicare Inc., a Covington, Ky.-based pharmaceutical services company, saw its 3.25% convertibles due 2035 at 83.50, up about 0.25 to 0.50 point.

-Kenneth Lim contributed to this report

Mentioned in this article:

Health Management Associates Inc. NYSE: HMA

Hartford Financial Services Group Inc. NYSE: HIG

Lifepoint Hospitals Inc. Nasdaq: LPNT

Molina Healthcare Inc. NYSE: MOH

Omnicare Inc. NYSE: OCR

Rovi Corp. Nasdaq: ROVI

SAS AB Stockholm: SAS

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