Calendar additions appreciated but some long for days of larger convertible offerings

By Sara Rosenberg

New York, Nov. 4 - The emergence of four new convertible deals - AudioCodes Ltd., Conmed Corp., Ryerson Tull Inc. and Powerwave Technologies Inc. - was welcomed by the market as a nice change to the previously bare new issuance forward calendar, but some still wish that more meaty deals would find their way into the marketplace.

"I'd rather have something than nothing but bear in mind the three issues put together is $350 million," a market source told Prospect News before the $150 million Powerwave deal was announced. "It's good to have some activity. This is definitely better than nothing. But it would be good to see some bigger issues come to market.

"In the olden days $300 million was considered average size," the source continued. "But I would guess even $200 million in the secondary would add a lot of liquidity."

In the span of 24 hours, AudioCodes, Conmed, Ryerson Tull and Powerwave all announced plans for new convertible offerings -the largest sized at $150 million - and quickly moved forward on their intentions

"It's always good to have more deals come your way," a buy-side source said. "I think it's the recent rally in the market bringing them out. Even if you don't participate immediately at least there's more paper available [in the secondary] and you can get involved later."

When asked whether the relatively small size of the deals was a concern, the buy-side player responded "that's the trend recently. Larger companies have too much cash and so they don't need the cash. The only companies that tend to need the money are smaller companies so there are smaller deals."

AudioCodes makes changes

AudioCodes priced its $100 million senior convertible notes due 2024 offering after close Wednesday to yield 2% with an initial conversion premium of 32.5%. The Rule 144A deal had originally been expected to have an initial conversion premium of 35%.

Furthermore, the greenshoe was upsized to $25 million from $15 million.

Merrill Lynch & Co. and Lehman Brothers are joint bookrunners on the Rule 144A deal, with CIBC as co-manager.

The deal was re-offered on Thursday at 99, according to one source. The convertible was previously anticipated to be re-offered somewhere in the 98 to 99 range.

Proceeds will be used for general corporate purposes, including acquisitions.

AudioCodes is an Airport City, Lod, Israel-based voice infrastructure company.

Powerwave prices

Powerwave priced after the close Thursday $150 million of 20-year subordinated convertible notes at par to yield 1.875% with an initial conversion premium of 40%, according to a market source.

"It depends on where the stock opens up," a source said regarding whether he liked the deal or not. "If this is below $7.50 then the deal is not cheap. If it's higher then $7.50 then the deal is cheap. So it's hard to make an evaluation now."

Deutsche Bank is sole bookrunner on the Rule 144A deal.

The deal will be re-offered at 98.5.

A $50 million greenshoe is available.

Proceeds will be used to fund the purchase of $40 million of the company's common stock and to increase financial flexibility for possible future acquisitions and for general corporate purposes.

Powerwave is a Santa Ana, Calif.-based designer, manufacturer and marketer of ultra-linear radio frequency power amplifiers for use in the wireless communications market.

Conmed expected after close

Conmed was scheduled to price its $125 million convertible senior subordinated notes offering (B) due 2024 after close Thursday. Price talk is 2¼% to 3¼% with a 40% to 45% initial conversion premium.

The convertible was seen trading around in the gray market on Thursday at +1 1/8 bid, +1 5/8 offered, according to a market source.

UBS is the bookrunner on the Rule 144A, with Citigroup, Bank of America and JPMorgan acting as co-managers.

An $18.75 million greenshoe is available.

Of the proceeds, $90 million will be used to repay borrowings under the Utica, N.Y., medical technology company's senior credit agreement while $30 million will be used to buy back common stock in privately negotiated transactions, possibly including shares sold short by purchasers of the convertible notes. Any remaining proceeds will be used to repay debt and for working capital and general corporate purposes.

Conmed is a Utica, N.Y., medical technology company.

Ryerson Tull set for Friday morning

Lastly, Ryerson Tull Inc. is scheduled to price its $125 million convertible senior subordinated notes offering due 2024 on Friday morning, according to a market source. Price talk is 3% to 3½% with a 45% to 50% initial conversion premium.

"It is cheap but we are not comfortable with the company, its business fundamentals or the stock," a source said about this deal.

JPMorgan is the bookrunner on the Rule 144A deal.

Proceeds will be used to repay revolver debt.

Ryerson Tull is a Chicago distributor and processor of metals and other materials.

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