CommScope climbs on debut; Hertz contracts; Regions trades 101, B of A up; BankUnited falls

By Rebecca Melvin

New York, May 22 - CommScope Inc., which priced an upsized $250 million of six-year convertibles at the midpoint of talk, was a focus of trade Friday, moving up through the morning session along with its underlying shares, before trading tapered off ahead of the early close for the bond market and a three-day holiday weekend.

The bond market closed at 2 p.m. ET, and stock and bond markets are closed Monday in observance of Memorial Day.

"CommScope was pretty active this morning," a New York-based sellside desk analyst said.

Hertz Global Holdings Inc. looked weaker on its second day in trade; but Regions Financial Corp., which also debuted Thursday, moved back up above par.

Also among financials, Bank of America Corp.'s perpetual convertible preferreds were active and bounced back nicely after slumping earlier in the week.

BankUnited Financial Corp. convertibles pulled into trade at a price of just 2 late Thursday after news that regulators took over the Coral Gables, Fla.-based bank and then immediately sold the operations to a group of private investors.

The BankUnited 3.125% convertibles improved slightly Friday when a small amount traded at 4.75 to 5.2 flat, according to a New York-based sellside trader.

Playboy Enterprises Inc. was sparking bids mostly within the range of previous trades amid chatter that the loss making adult lifestyle company is seeking a sale.

"All in all, it was a busy week of not so exciting new deals," a Connecticut-based sellside analyst said.

The news deals, which peaked on Wednesday, when six were in play, including four for release for secondary trading on Thursday, were hampered by the week's pullback in equities.

"It was bad timing," a sellsider said of the week's lackluster new deals. "Paper ran up so much, and equities too. We're pausing; we may go lower or we may go higher. Rates are ticking up and that dampens things."

CommScope gains on debut

The newly priced CommScope 3.25% convertibles due 2015 traded up to 101 bid, 102 offered early and later were seen around 104.

Shares of the Hickory, N.C.-based communication network infrastructure company surged $3.17, or 14%, to $25.30.

The $250 million convertible deal, which was upsized from $200 million, priced at the midpoint of talk, which was for a coupon of 3% to 3.5% and an initial conversion premium of 22.5% to 27.5%.

The conversion premium on the notes is 25%, and the conversion price is $27.50.

CommScope also priced an upsized 9.1 million shares of common stock at $22.00 per share, resulting in about $200 million in proceeds.

When asked which of the week's deals he liked, an outright buysider said he liked Saks Inc. and Hertz but that he passed on CommScope.

A sellside analyst said CommScope is a solid credit, but the bonds didn't set up well.

This week Standard & Poor's affirmed CommScope's BB- corporate credit rating and raised its senior secured rating to BB, while Moody's Investors Service was likely to revise CommScope's outlook to stable on the equity raise.

The company's recent amendment of financial maintenance covenants and pay down of debt sufficiently strengthens the company's financial profile to withstand a challenging operating environment over the next year, S&P said.

"CommScope's stable outlook reflects our expectation that profitability for the remainder of 2009 will be better than very weak first-quarter results due to seasonally stronger sales and cost savings. This expected operating improvement, coupled with lower debt levels and increased covenant headroom, support the stable outlook," S&P said.

Hertz trades 98.75

Hertz' 5.25% convertibles due 2014 traded at 98.75 versus a share price of $6.30 during the session. On Thursday, it was about 99.625 to 99.75 near the close when shares settled at $6.32.

Shares of the Park Ridge, N.J.-based auto and equipment rental company shed 6 cents, or almost 1% on Friday, settling at $6.26.

The deal was significantly upsized to $450 million of five-year convertible notes from $250 million.

BankUnited thuds

BankUnited Financial's 3.125% convertibles due 2034 traded a bit at 4.75 to 5.2 flat, compared to 2 late Thursday, and down from around 9 earlier this year.

"The holding company went poof as we thought," a New York-based sellside trader said.

Asked to put a little color around the BankUnited trades, the sellsider described it as a "thud."

The failure marked the end of a slow demise for the $13 billion-asset thrift company, based in Coral Gables, Fla.

American Banker reported that the failure's price tag of $4.9 billion pales only to the $11 billion cost of IndyMac's failure last year.

It was the fourth-biggest thrift ever to fail and the largest collapse this year.

A group of investors including Kanas, W.L. Ross, Carlyle Investment Management, Blackstone Capital Partners, Centerbridge Capital Partners, LeFrak Organization, the Wellcome Trust, Greenaap Investments Ld., and East Rock Endowment Fund have agreed to assume $12.7 billion in assets and $8.3 billion in non-brokered deposits, and start a new bank also called BankUnited.

The new owners and the Federal Deposit Insurance Corp. entered into an agreement to share losses on roughly $10.7 billion in assets. The new thrift will also provide $900 million in new capital. The FDIC said it will pay brokers directly for $348 million in deposits.

The Office of Thrift Supervision said BankUnited was "critically undercapitalized and in an unsafe condition to conduct business."

BankUnited was the first institution to fail with over $10 billion in assets since the Nov. 21, 2008 closure of $12.8 billion-asset Downey Savings and Loan in California. But even before that, the failures so far in the crisis have been mostly of smaller institutions.

The two largest failures of the downturn both occurred last year: $30 billion-asset IndyMac Bank in Pasadena, Calif., and $307 billion-asset Washington Mutual Bank.

Regions edges up, B of A bounces

Regions Financial's 10% mandatory convertibles due December 2010 traded at 101 versus a share price of $4.10 on Friday, compared to 99.5 with the stock at $3.90 on Thursday.

Shares of the Birmingham, Ala.-based financial services holding company started out a little higher Friday but pretty much slid gradually to the close, to settle down 6 cents, or 1.5%, at $4.04.

Bank of America's 7.25% perpetual convertible preferred shares traded 704 toward the end of active trading Friday, compared to 669 trading near the close of markets on Wednesday, which was versus $11.49 for its stock.

The move was called a positive bounce back after it fell amid headlines that the Charlotte, N.C.-based bank raised $13.5 billion through common stock sales, with more than half of that amount occurring Tuesday.

Playboy finds bids

Playboy's 3% convertibles due 2025 were bid at about 61 on Friday, which is within the 60.75 bid, 61.25 range at which previous trades have occurred.

"They were better bid," a sellsider said, citing a story in the New York Post that reported that the Chicago-based adult lifestyle company was seeking a buyer for $300 million.

The article, which pointed out that internet and video-on-demand have eroded demand for its magazine, said Apollo Capital Partners and Providence Equity Partners have been approached as potential suitors.

Shares of the company gained 34 cents, or 13%, to $2.87.

Mentioned in this article:

Bank of America Corp. NYSE: BAC

BankUnited Financial Corp. Nasdaq: BKUNA

CommScope Inc. NYSE: CTV

Hertz Global Holdings Inc. NYSE: HTZ

Playboy Enterprises Inc. NYSE: PLA

Regions Financial Corp. NYSE: RF

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