Sunrise urged to auction block; Starwood spikes; subprimes up; Clearwire surges; Trump higher

By Ronda Fears

Memphis, June 14 - Nursing home operator Sunrise Senior Living Inc. stockholder Millennium Partners revealed Thursday that he had sent a letter to the company advocating a sale of the company, a merger or breakup to boost stock value.

Starwood Hotels & Resorts Worldwide Inc. speculation got hot again about a takeover attempt by noted investor Kirk Kerkorian's Tracinda Corp. "Chatter is circulating that Tracinda has a mid-$90s offer on the table," said a trader, who noted the company has a market cap of about $15.25 billion and $1.8 billion of debt. The stock (NYSE: HOT) gained 89 cents, or 1.27%, to $70.89, but the trader also noted big volume and open interest in the July and August call options at $75 and $80.

Trump Entertainment Resorts Inc. also got a big lift on speculation that a deal is near and upward of $17.50 per share, which one trader said came from activity in the options market on the name Thursday. This is probably more realistic, the trader said, than rumors about three weeks ago that there was a bid on the table for the Atlantic City gaming concern in the neighborhood of $23 to $24 per share. He said Las Vegas developer Steve Wynn of Wynn Resorts Ltd. is still rumored to be among the potential buyers for Trump, however. The stock (Nasdaq: TRMP) gained 95 cents, or 6.65%, to $15.23.

Several subprime mortgage lenders came to life Thursday, even as the Mortgage Bankers Association reported that the percentage of delinquent payments due for subprime adjustable-rate mortgages jumped to 15.75% in first quarter - the highest on record.

"We think the worst might be over for the subprimes, at least once they cycle through these 2006 vintage loans," a trader said. "Approval standards are stiffer now, so delinquencies and foreclosures will taper off."

Novastar Financial Inc. and Accredited Home Lenders Holding Co. were higher with the first (NYSE: NFI) adding 9 cents to $9.31 while the latter (Nasdaq: LEND) rose 11 cents to $14.50. Fremont General Corp. (NYSE: FMT) lost 13 cents to $12.50, however, and bankrupt New Century Financial Corp. (Pink Sheets: NEWCQ) was unchanged at 39.5 cents.

Interest in the satellite race heated up again Thursday with rumors that EchoStar Communications Corp. would join Liberty Medical Capital to make a bid for Intelsat, which in turn renewed speculation that EchoStar would forge a linkup with DirecTV Group Inc., for which Liberty is about to consummate a majority takeover. The Intelsat auction process is slated to end Thursday.

The auction of SatMex also was on the lips of traders in the sector, as its auction is due to conclude Friday and bids are "solid," as one put it. Loral Space & Communications Inc., however, which will get a fair chunk of the SatMex sale proceeds, lost ground on the Intelsat news, the trader said. Loral (Nasdaq: LORL) dropped 19 cents, or 0.39%, to $48.30.

Furthermore in the satellite space, Clearwire Corp., a WiMax high-speed wireless broadband company founded by former McCaw Cellular founder Craig McCaw, shot up on news it has inked a deal to deliver WiMax to the satellite television providers EchoStar and DirecTV. With Clearwire's IPO getting off to a hot start in March, despite some skepticism, traders said the news was "a big feather is some hats."

Among distressed equities, a market source noted action this week in Interstate Bakeries Corp. - a big drop Tuesday followed by a surge Wednesday - related to "a pretty good-sized seller in the market" that sparked a case of the jitters regarding the bankrupt maker of baked bread and sweets. A concern, he said, is that the company's business plan, which is due June 23, will provide no payout to equityholders. This source does not think that will be the case, however. The stock (Pink Sheets: IBCIQ) on Thursday added 2 cents, or 0.85%, to $2.37.

Delphi Corp., the bankrupt auto parts supplier, also surged Thursday on news that it and former parent General Motors Corp. may be close to inking concessions with the United Auto Workers union, and that Highland Capital Management LP may become the lead investor in a Delphi's reorganization plan. The stock (Pink Sheets: DPHIQ) gained 15 cents, or 5.68%, to $2.79.

Otherwise, Ameron International Corp. got a big shot of buying Thursday, too, as a value play. The company manufactures highly engineered products and materials for the chemical, water, wind, and infrastructure markets, such as fiberglass composite pipe for transporting oil, chemicals and for water and wastewater transmission lines. It also is involved in wind tower fabrication and a partner in Tamco, a steel mini-mill in California. The stock (NYSE: AMN) soared by $2.80 on Thursday, or 3.48% to $83.30.

"The company is being unfairly penalized by the market for its perceived exposure to the residential real estate market," the buysider said.

"Ameron is a significantly under-followed, mis-priced security trading at a steep discount to its fair market. Inclusive of the company's consolidated future earnings power, Ameron [has] considerable downside protection based on our appraisal of tangible net asset value. Finally ... a significant share repurchase program would provide even greater upside."

Sunrise sees small gain

Sunrise stockholder Millennium Partners said Thursday it sent a letter to the company on May 31 advocating a sale of the company or the replacement of its management.

"The stock is on the move and it is in a great business with a growing aged population," a trader remarked, noting that Beverly Enterprises Inc.'s buyout in late 2005 was at about a 40% premium.

"The big jump was yesterday [Wednesday], not today. I don't know exactly what that's about. I think it will find a bid, though, and based on some of that past deals could see something in the low- to mid $50s, even with the hair on it" related to a Securities and Exchange Commission investigation.

Sunrise (NYSE: SRZ) on Thursday traded in a wide band of $40.84 to $42.97 before settling with a gain of just 8 cents on the day, or 0.19%, to $41.60.

Millennium urged the company to seek a buyer for the company or a merger, or restructure in a way that its different elements - primarily real estate development and ownership on the one hand and health care facility operation on the other - can be more readily appreciated and valued by the market.

Or, if neither of those seems feasible, then, at the very least, Millennium said the company should recruit new management that is more professionally competent at successfully managing a public company.

It's not the first conflict the company has run into with its bigger stockholders.

On May 29, Sunrise Senior Living shareholder SEIU Master Trust called for the replacement of the company's independent directors, asserting its outside directors' personal and business ties to Sunrise and its management undermine their credibility.

Also on May 29, the SEC launched a formal investigation into the company related to insider stock sales, the timing of stock option grants and its historical accounting practices.

SEIU Master Trust said it wants Sunrise to announce by June 16 that it has agreed to the changes.

EchoStar, DirecTV big picture

Liberty Media and EchoStar will make a surprise joint bid in the auction of satellite provider Intelsat, which ended Thursday, the Wall Street Journal reported. Speculation puts Intelsat fetching between $4.5 billion and $5.5 billion, but one trader said the bigger picture holds the prize.

"If EchoStar gets its hands in Intelsat and has a partnership with Liberty and Liberty essentially owns DirecTV, then you could draw a line to there being a linkup with EchoStar around the corner," the trader said.

"This noise about a merger of EchoStar and DirecTV has been around a long time, but I think Liberty might be able to make it happen."

EchoStar (Nasdaq: DISH) settled the session unchanged at $44.93 after heavy volume of 2.23 million shares traded in a band of $44.75 to $45.59.

Liberty and EchoStar each run satellite-to-home TV broadcast systems that compete. By jointly owning Intelsat they could cut costs. Intelsat is the industry leader in providing satellite services, and its main customers are cable broadcasters that compete with companies like Liberty and EchoStar.

This year, Liberty is slated to take over satellite broadcaster DirecTV and the joint venture on Intelsat is seen as paving the way for an EchoStar venture or merger with DirecTV. Intelsat is owned by private equity firms Apax Partners, Apollo Management, Madison Dearborn Partners and Permira.

Dish deals advance Clearwire

EchoStar was higher in after-hours trading but its gain still paled to DirecTV's on Thursday, which was nearly 3%, and, furthermore, that gain was nothing compared to Clearwire's on inking a deal with the two satellite broadcasters.

Clearwire announced Thursday it has signed deals to provide wireless high-speed internet access to DirecTV and EchoStar, which will help them answer the pressure from cable companies who have seen subscriptions rise because of bundled cable, phone and internet access package. The launch is planned for later this year.

DirecTV (NYSE: DTV) gained 62 cents on the day, or 2.71%, to $23.48.

Clearwire (Nasdaq: CLWR) surged $4.63, or 23.3%, to $24.50.

"It is clawing back up to where the IPO priced and seems to be poised for a big breakout," a trader said.

Clearwire's initial public offering in March received much ballyhoo as a hot issue but also met with some concern that it might suffer the same fate as Teledesic, another enterprise funded in part by McCaw that nearly went under with the failures of satellite operators Iridium LLC and Globalstar Inc. Mostly, traders said ahead of the Clearwire IPO that investors were nervous about its high cash burn rate.

The IPO priced March 8 at $25 per share and was upsized to 24 million shares from 20 million shares.

The big draws to Clearwire are hinged to McCaw's past successes, including the sale of McCaw Cellular to AT&T Corp. for more than $13 billion, and securing upwards of $900 million in venture capital from Intel Corp. and Motorola Inc. for Clearwire last year.

© 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.