New deals seen coming from PSEG, Orbital Sciences soon

By Ronda Fears

Nashville, Tenn., July 18 - After no new deals for more than two weeks, convertible market participants are hopeful that next week may bring a deal from Orbital Sciences. Also, Public Service Enterprise Group said it plans to sell $400 million to $500 million of mandatory convertibles sometime in third quarter.

There also still are rumblings in the market that Duke Energy and CMS Energy are looking to make a convertible offering, most likely more mandatories.

Tom O'Flynn, chief financial officer of PSEG, disclosed the plans in the company's earnings conference call on Wednesday. Paul Rosenbaum, a company spokesman, said Thursday that it appears a banker has been selected but not officially named.

While timing is still a bit uncertain for the PSEG deal, the spokeman's comment suggested it might be sooner than later.

But Orbital Sciences may be the first among the prospects, as it looks to refinance its $100 million of 5% convertible subordinated notes that mature in October.

Market sources anticipate hearing something on Orbital Sciences next week.

"At this juncture, I'd like to see any new deals," said Stuart Novick, a convertible analyst at Salomon Smith Barney.

"We're looking at the worst month for convertible issuance in four years. You have to go back to the summer of 1998, when we had two months without any new deals."

The S&P 500 was below 1,000 for that period, he noted, and is now at about 881.

"If we don't have any issuance while the S&P 500 is below 1,000, then it could be a while," Novick said.

PSEG's deal would be fairly well received, many think, because it is more of a traditional utility, rather than one with heavy power trading operations like Duke and CMS, which are both struggling against investigations into wash trades.

Mirant, another power name embroiled in the wash trades scandal, sold a $370 million convertible note with a 5.75% coupon at par on July 1, which has not fared well in the aftermarket.

The new Mirant bond was quoted Thursday at 80.5 bid, 81.5 asked with the stock closing off 16c to $4.48.

Duke and CMS are not new to the convertible market, however. Both have existing mandatories in play.

The new Duke 8% ended down 0.69 to 16.58 and the older 8.25% closed down 0.59 to 16.86, while the common shares fell $1.70 to $20.72.

The CMS 7.25% closed off 0.19 to 16.51 with the stock ending down 20c to $10.10.

In March, space technology and satellite maker Orbital Sciences said its ability to stay afloat hinges on replacing or refinancing the convertible(Caa1/CCC+) , along with meeting its 2002 cash flow plan and complying with terms of a new $60 million credit facility.

The likelihood that Orbital could swing a new deal is very good, according to sources.

Novick noted that the company now has a $400 million, multiyear contract with Boeing that should bode well for its outlook.

© 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.