New American Realty trades around reoffer price; Radian flat to slightly higher on swap

By Rebecca Melvin

New York, July 24 - American Realty Capital Properties Inc.'s newly priced 3% convertibles traded quietly around its 99.5 reoffer level after the New York-based real estate investment trust priced $300 million of the five-year notes wide of initial talk. Pricing was revised during marketing.

Elsewhere trading was quiet with earnings news spurring limited trading action, as market players mostly sat on the sidelines while equity markets had a rare down day and Treasury yields bumped up.

There was decent two-way flow in Radian Group Inc.'s convertibles, a New York-based trader said. They traded flat to slightly better with hedged investors mostly selling and outright players mostly buying on a little weakness after the Philadelphia-based mortgage insurer missed earnings per share estimates.

Omnicare Inc. was better outright after the Cincinnati-based geriatric pharmaceutical services company reported earnings and revenue that beat estimates and guided in line for full-year results.

Likewise, Ford Motor Co.'s convertibles were a little higher in line with the underlying shares after the Dearborn, Mich.-based automaker reported earnings and revenue that were better than expected and raised its full-year profit guidance.

But General Cable Corp.'s convertibles traded flat to a little lower with weaker shares, according to Trace data.

The market was quiet, but "seemed fine," a West Coast-based trader said. "Equities were selling off a little; but ever since the Fed news and the hard sell-off that followed then, there has been two weeks of tightening."

A second trader said that it seemed everyone was "watching Treasuries get smoked and sitting back a little bit."

Treasuries were lower for a second day after a $35 billion auction of five-year notes met with weaker than average demand. The weak market anticipates the Federal Reserve will begin tapering its $85 billion per month in bond purchases later this year. The yield on the benchmark 10-year note was up 7 basis points for a 2.58% yield late in the day.

In economic data, U.S. new home sales climbed 8.3% to an annualized pace of 497,000 homes, the highest level since May 2008, the Commerce Department said. That level was higher than 484,000 that surveyed economists had expected. In Europe, a manufacturing index based on surveyed euro-area purchasing managers rose to 50.1 in July from 48.8 in June, Market Economics said. Earnings from Apple Inc. and Ford were better than expected.

But the Dow Jones industrial average and S&P 500 stock index dipped. The Dow ended down 25.5 points, or 0.2%, at 15,542.24; the S&P 500 came off 6.45 points, or 0.4%, to 1,685.94. The Nasdaq Stock index ended flat at 3,579.60, which was up 0.33 point.

American Realty near reoffer

American Realty Capital's newly priced 3% convertibles due 2018 traded at and slightly below and above its 95.5 reoffer price.

A syndicate source said "the last indicative run this morning was 99.5 bid, 100.5 offered outright."

Shares of the New York-based real estate investment company ended down a dime, or 0.7%, at $14.44.

The notes have a 15% initial conversion premium and are therefore convertible at $16.72.

The deal's terms were revised to a 3% coupon and a 15% premium, from a 2.5% to 3% coupon and a 20% to 25% premium.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Barclays, BMO Capital Markets and KeyBanc Capital Markets were joint bookrunners. There is a $30 million greenshoe.

Prior to the changes, the planned deal looked rich at the cheap end of talk, one trader said.

Proceeds will be used to repay debt under its existing senior secured revolving credit facility and for other general corporate purposes, including investing in properties in accordance with investment objectives.

Radian flat to higher

Radian's 2.25% convertibles due 2019 traded mostly between 146.375 bid, 147.375 offered versus an underlying share price of $13.83.

That was flat to up about 0.125 point on a delta-neutral basis, a trader said.

The Radian 3% convertibles due 2017 traded indicatively at 141.5 bid, 142.5 offered versus the same $13.83 share price.

Shares of the Philadelphia-based mortgage insurer ended up 4 cents at $13.87 in very active trade.

"We've been active in Radian, post earnings," a New York-based trader said. "The 2.25% convertibles were more active than the 3% convertibles. But there was decent two-way flow between swap and outright players, with the swap investors mostly selling and outrights adding on weakness right here."

"The 3%'s were not that active, but they were pretty much in line to up 0.125," the trader said.

The mortgage insurer posted a smaller quarterly loss helped by a rise in its premium income.

Radian's loss fell to $33.2 million, or 19 cents per share, in the second quarter from $119.3 million, or 90 cents per share. The consensus estimate was for a loss of 4 cents per share.

Net premiums earned rose 14% to $213.1 million.

Omnicare does 'fine'

Omnicare's 3.25% convertibles due 2035 traded up a point to 104.5. They started the day at 103.25 bid, 103.75 offered, a trader said.

The 3.25% convertible is the close-dated issue and not overly active, the trader said.

Omnicare's 3.75% convertibles due 2025 traded up nearly 6 points to 200.806.

Shares of the Cincinnati-based geriatric pharmaceutical services company gained $2.39, or 4.7%, to $53.13.

"They did fine," the trader said.

Omnicare reported gross profit of $378 million for the second quarter, compared to $367 million in the year-earlier period. Adjusted earnings excluding one-time items was 90 cents per share, compared to 83 cents per share in the year-earlier quarter.

Revenue was flat at $1.57 billion and higher than the $1.54 billion that analysts expected.

The company boosted its full-year guidance to $6.1 billion to $6.3 billion revenue, which was slightly higher than previous guidance of $6.1 billion to $6.2 billion. Adjusted cash earnings per share excluding items is now seen at $3.56 per share to $3.64 per share, which is up from $3.47 per share to $3.57 per share. Cash flow from operations was raised to $475 million to $525 million from $450 million to $500 million.

Mentioned in this article:

American Realty Capital Properties Inc. Nasdaq: ARCP

Ford Motor Co. NYSE: F

General Cable Corp. NYSE: BGC

Omnicare Inc. NYSE: ORC

Radian Group Inc. NYSE: RDN

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