Titan, Comcast and J.C. Penney gain on earnings; Platinum, NY Community Bancorp pricing

By Sara Rosenberg

New York, Oct. 28 - New deals were back as the main focus of the convertibles market Monday with two offerings set to price after the close.

In secondary activity, several names experienced activity on earnings news, including Titan Corp., Comcast Corp. and J. C. Penney Co., Inc. However, overall it was a quiet day with an improved tone, according to market sources.

Platinum Underwriters Holdings Ltd. is scheduled to price $125 million of three-year, non-callable mandatory convertibles in the ACES (adjustable conversion rate equity security) units structure after hours on Monday.

Price talk puts the yield at 7% to 7.5% and the initial conversion premium at 18% to 22%.

The deal has an $18.75 million greenshoe and $25 par.

Goldman Sachs & Co., Merrill Lynch & Co. and Salomon Smith Barney are joint bookrunning lead managers.

The sale is part of an initial public offering spin-off from The St. Paul Cos. Inc., with the straight equity component filed as 34 million shares at $22.50-$23.50.

The Platinum deal has traded up to a 3% or 4% premium in the gray market, according to a trader, with another source putting it a little stronger at 1¼ points higher.

Also after the close Monday, New York Community Bancorp Inc. is scheduled to sell $240 million of convertible trust preferred securities due 2051 using the Bonuses structure, according to a syndicate source.

Coupon talk is 5½% to 6% and talk on the conversion premium is 27%, the syndicate source said.

The deal has five years of hard call protection and a provisional call at 125%.

There is a $35 million greenshoe. The securities have a liquidation preference of $50.

Salomon Smith Barney is lead manager with Lehman Brothers as joint lead. Bear Stearns & Co., Keefe Bruyette & Woods Inc. and Sandler O'Neill and Partners are co-managers.

Proceeds will be used to make equity contributions to New York Community Bank, to finance multi-family loan originations and potential acquisitions and for general corporate purposes, according to a filing with the Securities and Exchange Commission.

The New York Community Bancorp deal was trading at a small discount of less than ½% in the gray market, according to a trader.

"It looked a little interesting," a trader told Prospect News in regards to the New York Community Bancorp deal. "At this point it's not something we want [to participate] in because of the mortgage cycle. It's an okay piece of paper."

New York Community Bancorp, Inc. is the $10 billion holding company for New York Community Bank.

Meanwhile the secondary saw a quieter session.

"The market is kind of treading water. We could have some choppiness," a researcher said, explaining that between talk of a possible interest rate cut by the Federal Reserve Board and scores of pieces economic data scheduled for release towards week end, people may sit back and wait for some resolution in these economic uncertainties.

Not all agree that market participants are going to take to the sidelines in anticipation of economic data. According to Jeff Seidel, head of U.S. convertible research at Credit Suisse First Boston, the market may slow down a day before the Federal Reserve meeting on Nov. 6 or the day of the meeting, but "I still think it's an earnings driven market."

"Spreads continue to tighten so I think things are marginally better," Seidel said regarding Monday's market. "Overall the tone is better."

Titan's convertible paper was relatively active on Monday as the company reported better-than-expected earnings, according to Seidel.

The company reported pro forma earnings per share of 13 cents for the third quarter, compared to the consensus of 12c EPS. The third quarter EPS is a 63% increase over the same period last year. Revenues for the quarter were $352.8 million, compared to $237.2 million for the comparable period in 2001.

"This past quarter we made significant progress in laying the foundation for a very successful 2003. We are well on our way towards exiting Titan Wireless' businesses and still expect our exit from these operations to be substantially completed by the end of the year. We also made additional progress in exiting our commercial information technology operations, and in moving to reduce our cost structure by merging Titan Systems into Titan. And in addition to winning new contracts and building the backlog, we were also successful in further reducing our DSO (days sales outstanding) on accounts receivable, which are now down to 79. We believe that these actions will help us meet our goal of free cash flow from operations of approximately $70 to $80 million in 2003, which we intend to use largely to pay down debt," said Eric M. DeMarco, president and chief operating officer, in a news release.

"With bookings of nearly $1.7 billion in the first three quarters of the year and the very large contract win which we announced today, we now have very strong visibility into 2003 and are comfortable increasing our internal revenue growth projection in our defense business to approximately 13% from the 12% forecasted just last quarter. With a backlog that is now over $3.5 billion and a bid and proposal pipeline that remains at approximately $5 billion, despite recent large contract wins, we believe Titan is very well positioned to achieve these results," DeMarco concluded.

Titan is a San Diego, Calif. provider of comprehensive information and communications systems solutions and services to the Department of Defense, intelligence agencies, and other federal government customers.

Titan's 5¾% preferred convertibles were quoted around 40½ in the early afternoon, up about a point and a half from Friday's closing levels, Seidel said. Meanwhile a trader saw the convertibles closing at 38 7/8, compared to the stock close of $13.23, up $1.24 or 10.34%.

Comcast was "somewhat active" on Monday on its earnings news as well, according to Seidel.

The Philadelphia, Pa. cable operator reported net income of 8c per share, compared to a net loss of 11c per share last year. However, these results fell far short of analyst expectations of an EPS of 15c.

"We are pleased to report another quarter of solid operating and financial results with double-digit operating cash flow growth in each of our core cable, commerce and content businesses. In addition, for the third consecutive quarter, we generated significant free cash flow totaling $262 million for the quarter and $660 million year-to-date," said Brian L. Roberts, president, in a news release.

The 0% convertibles due in 2020 closed at 78 7/8, up about half a point, according to a trader, compared to the stock close of $18.51, up 51c or 2.83%.

J. C. Penney Co., Inc.'s 5% convertible due 2008 closed about a point higher from the previous day's level at 96/97, according to a trader. The stock closed at $19.47, up 55c or 2.91%.

The Plano, Tex. retail operator reported on Monday that third quarter operating earnings are now expected to exceed 21c per share, which is the upper end of analysts estimates, due to stronger-than-expected comparable department store sales in October and continued improvement in operating profits at its Eckerd unit.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.