Upsized Silver Standard sees quiet debut with bonds ending near par; ArcelorMittal flat

By Rebecca Melvin

New York, Jan. 11 - Silver Standard Resources Inc.'s newly priced 2.875% convertibles due 2033, which were upsized to $250 million from an initially talked $200 million, traded up some out of the gate Friday after being released for secondary dealings but slipped back to par, following shares lower in quiet action, market sources said.

On a dollar-neutral, or hedged, basis, the new paper of the Vancouver, B.C.-based silver mining company expanded a bit with the underlying shares slipping 3%, a trader said.

Still, the new notes, which priced marginally beyond the rich end of talk, were pretty quiet for first-day dealings, with sources seeing it as possibly having something to do with the fact that the issuer is a Canadian company, one of the underwriters was Canadian, and the deal was distributed under Regulation S as well as Rule 144A.

A syndicate source said that the allocations weren't made public, in terms of how much was sold internationally and how much was sold to U.S. investors. But he said there were some Canadian accounts that came in, the deal was five times oversubscribed, and the profile of investors included about 60% outright players.

Trading action continued in ArcelorMittal SA's $2.25 billion of mandatory convertible subordinated notes, which debuted Thursday, but it was quieter in tandem with the overall market, which quieted into the weekend. Pricing of the mandatories was little changed at around 26, which was up from its 25 issue price.

Elsewhere, EMC Corp. was an actively traded name in the convert space. Alliance Data Systems Corp. was among the in-the-money names, which were coming in a little, and JDS Uniphase Corp. was one of the short-dated, vol. names, which were continuing to strengthen.

Also on Friday, THQ Inc. in the distressed arena jumped to 20 from 15 a week ago and from 16.375 earlier in the week. Action was spurred by the status of agreements being hammered out in bankruptcy court over debtor-in-possession financing and bid procedures tied to a planned $60 million asset sale.

The bonds "have been better to buy," a Connecticut-based trader said, citing the auction of assets, which is a week and a half away, for action in the name.

Better to buy means that there is a relatively strong bid for the paper and not such good availability on the offer side.

The convertible bond market, which had been strengthening for the better part of three weeks, began to soften slightly this past week on Thursday and Friday, sources said.

Demand was especially strong for safe, short-dated, yield paper, and that spread to some of the "junkier" names, a New York-based trader said. But by Thursday, with a shift in focus to ArcelorMittal's new $2.25 billion of mandatories and less liquidity in the secondary market, strength dropped off some.

"Today, it feels like everything on the corporate side is so tight. In converts, everything has been bid up on anything that had yield, and yesterday and today, it got a little bit softer, as it seemed there were less people chasing [yield]," a New York-based trader said.

"The liquidity was kind of gone as people focused on the big deal," he said, referring to the ArcelorMittal deal on Thursday.

On Friday, volume was lighter than what was seen the rest of the past week, another source said.

Silver Standard around par

Silver Standard's newly priced 2.875% convertibles due 2033 traded up to 101 bid, 101.5 offered out of the gate Friday before the stock started going lower, a trader said.

Later the new convertibles were seen at 99.5 bid, 100.5 offered with the stock down 3%. A tighter spread of 99.75 bid, 100.25 offered was also heard, and at the close, a syndicate source put the last market at 100 bid, 101 offered versus the $13.55 closing share price.

Silver Standard shares pared some intraday losses - they had been down near 4% - to end the day down 45 cents, or 3.2%, following active trade.

The paper traded up on a hedged basis by a point or two, a New York-based trader said.

But it was quiet.

"Maybe it was because of the size of the deal or because one of the underwriters was Canadian," a New York-based trader said.

"I am sure it's trading with the underwriters, but I haven't seen them or traded them," the trader said. "People got their action yesterday, I guess."

The new bonds came marginally beyond the rich end of talk, which was for a coupon of 2.875% to 3.375% and an initial conversion premium of 37.5% to 42.5%. The premium on the new paper was 42.86%.

Citigroup Global Markets Inc. and BMO Capital Markets Corp. are the joint bookrunners of the Rule 144A and Regulation S offering, for which the greenshoe was also upsized to $37.5 million of notes, increased from $30 million.

Co-managers included Deutsche Bank Securities Inc., RBC Capital Markets LLC, GMP Securities LP, UBS Securities LLC, Scotia Capital (USA) Inc. and Credit Suisse Securities (USA) LLC.

The conversion price is $20.00.

The convertibles will be non-callable for five years and then provisionally callable for seven years if the underlying shares are 130% of the conversion price for a certain period. There are puts in years seven, 10 and 15.

The convertibles will have full dividend and takeover protection.

Up to about $138 million of the proceeds will be used to repurchase or redeem the company's existing convertible notes in March and the remaining proceeds are for general corporate purposes, which may include developing or advancing its property portfolio.

Alliance Data 'in,' JDS up

Alliance Data's 1.75% convertibles due August 2013 traded at 196 outright, which was down 0.4 point on the day, according to Trace data.

That was parity less 0.875 point to parity less than 0.75 point, according to a New York-based trader.

Shares of the Dallas-based credit card processing company added 70 cents, or less than 0.5%, to $155.50 in average volume. Shares rose for the week.

JDS Uniphase's 1% convertibles due 2026 traded at 99.90, which is much higher than the paper was a couple of months ago, a New York-based trader said.

JDS shares moved down 25 cents, or 1.9%, to $13.22 in heavier-than-average trade, extending losses seen all week.

The Milpitas, Calif.-based broadband components and test equipment producer said Thursday its acting chief financial officer, Rex Jackson, has been promoted to CFO. The former CFO, David Vellequette, resigned in September.

Mentioned in this article:

Alliance Data Systems Corp. NYSE: ADS

ArcelorMittal SA NYSE: ADR: MT

EMC Corp. NYSE: EMC

JDS Uniphase Corp. Nasdaq: JDSU

Silver Standard Resources Inc. Nasdaq: SSRI

THQ Inc. Pink sheets: THQI

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