SunPower jumps on Total transactions; PHH slips further; market quiet ahead of holiday

By Rebecca Melvin

New York, Dec. 23 - SunPower Corp.'s convertibles jumped in otherwise quiet pre-holiday trading Friday after news that the San Jose, Calif.-based solar company agreed to buy a solar power subsidiary from French oil major Total SA.

In tandem with the acquisition, the French company, which currently owns about 60% of SunPower stock, agreed to buy an additional 18.6 million shares of SunPower at $8.80 per share - a 50% premium to SunPower's Dec. 22 stock close. The purchase will boost Total's ownership in SunPower shares to about 66%.

PHH Corp., which saw its longer-dated convertibles due 2014 traded sharply lower on Thursday, edged a little lower on Friday to 81 from 82.

The bonds and stock of the Mt. Laurel, N.J.-based mortgage company dropped after Standard & Poor's lowered some of its ratings on the company and said it may not be able to repay $423 million of debt due in early 2013.

Otherwise, Friday's session, with an early close for the bond markets, was pretty quiet, with "nothing notable" in trading action, a sellsider said.

Financial markets will remain closed on Monday in observance of Christmas.

Trading was light all week, but there were a few surprises along the way that spurred action, and there was a good bit of juggling of positions ahead of the end of the year.

Back in the solar space, bankrupt solar company Evergreen Solar Inc., which missed a coupon payment on its 4% convertibles in July, saw that paper trade higher by 0.125 point to 0.25 point to about 30 on Thursday, according to Trace data.

Jefferies Group Inc. was also active this past week, and bumped around on the New York-based mid-sized investment bank's earnings report Tuesday, which was better than expected. On Tuesday, Jefferies recouped Monday's losses and then some.

By far the majority of trading was in the larger, better-quality names. Amgen Inc.'s 0.375% convertible was an active issue and better, although that name is typically traded among non-traditional convertibles accounts, one sellsider pointed out.

"Today is just the day before Christmas," the sellsider said, referring to the lack of action.

In the broader markets, equities edged higher, with the S&P 500 index, with a 0.9% gain, turning positive for the year at 1,265.

Cheering investor sentiment was the votes by the House of Representatives and the Senate to extend temporarily a 2% payroll tax cut by two months.

SunPower pops

SunPower's 4.5% convertible bonds due 2015, which initially priced earlier this year, traded up about 6 points early Friday to 80, a Connecticut-based trader said.

SunPower's 1.25% convertibles due 2027 weren't trading as actively, but were also seen 6 points higher. They were 86 bid in late morning.

The market before the 86 bid was 84 bid, 85 offered, the trader said.

"SunPower was busy," the trader said of the convertibles, which trade on an outright basis.

Nevertheless, the move was in tandem with SunPower shares, which initially jumped about 19% on the Total news. Those gains were pared into the market close, ending up about 31 cents, or 5.3%, at $6.16.

A second trader commented on Total's investment, "They must have loved it; but they paid more than $21 then and $8.80 now, and the stock is $6.60."

The entire solar space has suffered woefully this past year, with share prices of many sector names down by 60%, 70% and 80% on the year, amid economic slowdowns in Europe and elsewhere and falling prices.

Suntech Power Holdings Co., which also has a convertible, has seen its shares slump more than 70%, and ReneSola Ltd., which has a convert too, has had its shares plunge more than 80%.

In Friday's news, SunPower will acquire solar power subsidiary Tenesol SA from Total for $165.4 million in cash.

Concurrently with the closing of the acquisition, Total has agreed to purchase 18.6 million shares of SunPower common stock in a private placement at $8.80 per share.

Tenesol makes solar panels in France and South Africa.

Upon consummation of the sale, and together with its initial investment in SunPower in April, Total will hold about 66% of SunPower stock.

The transaction has been approved by an independent committee of SunPower's board of directors and is expected to close early in 2012. SunPower expects the acquisition will positively affect its financial position in 2012, according to a news release.

In addition, Total has agreed to pursue negotiations for several additional agreements with SunPower related to directly investing in SunPower's research and development, developing the first initial, full-scale, commercial concentrator power plant with SunPower technology and purchasing 10 megawatts of SunPower products for the development of projects worldwide, the release stated.

Deutsche Bank Securities Inc. provided a fairness opinion to SunPower's board in connection with the acquisition.

On April 29, 2011, Total offered to pay $1.37 billion, or about $23.50 per share, for a majority stake in the company.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Evergreen Solar Inc. Nasdaq: ESLR

Jefferies Group Inc. NYSE: JEF

PHH Corp. NYSE: PHH

ReneSola Ltd. NYSE: SOL

SunPower Corp. Nasdaq: SPWR

Suntech Power Holdings Co. NYSE: STP

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