Nextel Partners soars on buzz of another new deal; Magma drops after KPMG dismissal hits tape

By Ronda Fears

Nashville, June 27 - Next week is expected to be slow as a result of the 4th of July holiday, but June has already hit a monthly record of the number of new convertible deals. With a couple of jumbo deals from General Motors Corp. and Xerox Corp. it also approaches the record for proceeds amount.

Morgan Stanley convertible analysts said the number of deals this week put the month of June over the top, with 53 deals, beating last months record-busting 48. Deal proceeds of $16.8 billion also near the May 2001 record of $20.8 billion.

Next week still has the last day of the month to get in on June business, but market sources expect it to be a slow period ahead of the holiday.

On Friday, traders reported that the performance of tthe new paper put into circulation this week was rather lackluster with only the new Crown Castle International Corp. showing any promise in the immediate aftermarket.

Nextel Partners Inc. captured a good deal of attention in secondary trading, though, as buzz continues to make the rounds that it will be returning to the convert market soon. The 1.5% due 2008, which was sold just a couple of months ago, climbed 5.375 points to 123.375 bid, 124.375 offered.

"People are still talking about Nextel Partners coming back to the market. It started last week or a couple of weeks ago when they were in the middle of the junk bond sale," said a buyside trader, referring to the upsized $450 million offering of 8.125% eight-year junk notes last week.

"There certainly seems to be some positioning going on. The stock volume was something like three times the normal average."

Nextel Partners stock closed up 55c, or 7.81%, to $7.59 with 6.4 million shares changing hands, versus the running average of 1.2 million.

Capital markets sources, as is often the case, tended to brush off the market talk, though.

"A lot of times these rumors get started because someone would like to see a certain name come to the market, but it doesn't mean there really is a deal in the works," one capital markets source said.

Valero Energy Corp., however, has plans to tap the convertible market again. The company had said previously it would sell $250 million of mandatory convertibles to help pay for its proposed purchase of a Louisiana refinery from Orion Refining Corp., pending court approval as Orion is in the midst of bankruptcy.

On Friday, Orion said it has received court approval for the sale, which is expected to be completed on July 1.

A Valero spokesperson, however, said specific details about any convertible offering had not been entirely hammered out.

Elsewhere in secondary activity, Magma Design Automation Inc.'s recent convert plunged on a blurb that hit the tape Friday afternoon about it dismissing its auditor. The 0% due 2008, which were sold at par in mid-May, fell 6.875 points to 102 bid, 103 offered.

Briefing.com reported that in an 8-K filing at the Securities and Exchange Commission, the software design firm disclosed that it had dismissed KPMG and hired PricewaterhouseCoopers.

Magma said that during its two most recent fiscal years and the subsequent interim period through June 24, 2003, there were no "reportable events", except that KPMG advised the company of the inability to complete quarterly and year-end financial reports without adjustments, according to Briefing.com.

Magma shares plummeted $2.25, or 11.28%, to $17.70.

Most new issues were lower Friday, as well, with the notable exception of Crown Castle.

The newest entrants into the convertible universe were from Crown Castle, Sealed Air Corp. McMoRan Exploration Corp. and GM.

GM's new jumbo $4 billion of 6.25% notes, offering a much fatter coupon than convertible buyers have been used to seeing, still lost steam out of the gate. Traders said there was heavy volume in the new issue, and a dealer at one of the lead banks pegged it at 95% of par. The issue, sold at par of 25, closed on the New York Stock Exchange at 24.78.

The other GM converts, which also were issued at par of 25, were also lower. The 4.5s lost 0.25 point to 24.46 and the 5.25s fell 0.32 point to 22.43.

GM shares, though, closed up 18c, or 0.5%, to $36.12.

One dealer also noted that Ford Motor Co. was lower Friday. The Ford 6.5% convertible trust preferred, issued at par of 50, dropped 1 point, or 2.24%, to 43.7 while the stock ended off 20c, or 1.78%, to $11.03.

Sealed Air sold an upsized $375 million of 30-year convertible notes at par to yield 3.0% with a 48% initial conversion premium - at the middle of yield talk and at the cheap end of premium guidance.

It was boosted from $300 million, which one buyside trader attributed to positive momentum gained from the company's offerings of $400 million of 5.625% senior notes due July 14, 2013, and $450 million of 6.875% senior notes due July 15, 2033.

But the new Sealed Air convert went south out of the chute.

Morgan Stanley closed the new Sealed Air issue at 99.125 bid, 99.625 offered. The stock ended off 9c, or 0.19%, to $47.22.

McMoRan's small $100 million of five-year convertibles, sold at par to yield 6.0% with a 25% initial conversion premium - at the cheap end of guidance, didn't see a lot of action and was quoted at par bid, 100.25 offered by lead manager Merrill Lynch.

Because there is practically no borrow on the stock, buyside sources said it ended up mostly in the hands of outright and high-yield accounts, which tend to have a lower turnover than hedge fund players.

Halliburton Co. and Electronic Data Systems Corp. also saw their new paper sink. One dealer speculated that fund managers were looking to pick up shorter dated paper and took some gains on those two new issues.

Halliburton's new 3.125% due 2023 dropped 1.375 points to 101.375 bid, 101.875 offered with the stock down 27c, or 1.15%, to $23.15.

EDS' new 3.875% due 2023 lost 1.125 points to 103.5 bid, 103.75 offered while the stock closed down 31c, or 1.42%, to $21.45.

Crown Castle was the bright spot of the day among the new convertibles in play, though.

Crown Castle sold $200 million of seven-year convertible notes at par to yield 4.0% with a 42.5% initial conversion premium - at the cheap end of guidance - and the issue gained more than 3 points in the immediate aftermarket.

One of the leads on the Crown Castle deal closed it at 103.375 bid, 103.875 offered. The stock ended up 14c, or 1.84%, to $7.74.

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