Charter's new convertible sees some activity; Sirius momentum stifled by stock downgrade

By Sara Rosenberg

New York, Nov. 24 - Charter Communications Inc.'s new convertible traded around on Wednesday as some people who got allocations were looking to peel out and take some profits while others, considering it a long-term investment that is a nice alternative to the common stock, were looking to buy.

At close the 5 7/8% convertible was quoted at 111 bid, 112 offered, according to a trader, versus a closing stock price of $2.29, up $0.15. In the late afternoon, the convertible was trading around 107 7/8 versus a common stock price of $2.19, according to another market source. And, earlier in the session the convertible had been trading around 106 5/8 versus a common stock price of $2.14, the market source added.

"The conversion ratio is 413 shares so any little tiny move in the stock will get a decent move in the bonds," the source explained.

Charter priced the convertible senior notes due 2009 after the close on Nov. 16 with a 12% initial conversion premium via bookrunner Citigroup Global Markets Inc.

On Tuesday, the St. Louis-based cable company said that the underwriters exercised the $112.5 million over-allotment option in full, raising the size of the deal to $862.5 million.

The notes had priced at the cheaper end of talk of 5.5% to 6.0% and roughly in the middle of premium guidance for 10% to 15%.

At the middle of price talk, sell side analysts had put it about 13% cheap. Three years of collateralized coupons also were a plus for the issue.

On its first day of trading last week, the convert closed out at 102 bid, 102.5 offered.

Part of the proceeds were used to buy U.S. Treasury securities to back the first six interest payments. Proceeds will also be used to redeem the company's $588 million outstanding 5.75% convertible senior notes due October 2005 and for general corporate purposes.

Sirius dips with stock

Sirius Satellite Radio Inc.'s newest 3.25% convertible gave up some of Tuesday's gains, dropping to 149.65 bid, 150.15 offered as the company's stock was weaker on the day due to an analyst downgrade, according to a market source.

On Tuesday, Sirius' convertible rallied by 12 points to 156.5 bid 157 offered as the company reported reaching a new subscriber milestone of 800,000, boosting the stock by as much as 14% during the session, which in turn boosted the convertible.

Furthermore, the New York City-based broadcaster said that with more than 800,000 subscribers it is on track to hit 1 million by the end of the year.

However, the happy momentum didn't last long as a J.P. Morgan analyst downgraded the stock on Wednesday to neutral from buy, causing a $0.46 loss on the day on the common to close at $6.25.

And, like Charter, the new convert has a rather large conversion ratio, 189 shares to be exact, meaning that any small move in the stock will result in a more substantial move in the bond, a sell side source explained.

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