UBS-Stillwater holds up amid lower shares; RTI jumps in gray; SWS quiet ahead of pricing

By Rebecca Melvin

New York, Dec. 8 - UBS AG priced $219.375 million mandatory exchangeables, including the already exercised greenshoe, and the new paper based on the common shares of Stillwater Mining Co. traded mostly flat at a $25 par on their debut Wednesday despite a slide in the common stock.

Also in the primary market, RTI International Metals Inc. launched a $175 million offering of five-year convertible bonds on Wednesday that was expected to price after the market close. The deal was said to be upsized during marketing to $225 million due to strong demand, but syndicate sources wouldn't confirm that. The deal was higher in the gray market at 103.

"It looks like a good deal - very popular," a Connecticut-based sellside analyst said.

Also set for pricing after the close was SWS Group Inc. But that deal was quiet and without a lot of interest reported in the small $95 million offering of five-year notes coming concurrently with an initial public offering.

"This is a reemergence of a company that's been private, and it's for a different sort of buyer," a New York-based sellside trader said.

Among established issues, Radian Group Inc. saw its convertibles in trade amid a jump up in the underlying shares. The Radian 3% convertibles due 2017, which initially priced early last month, traded at 96 versus a share price of $7.90.

Overall, trading volume was a bit stronger, but action was not broad-based. There were a lot of the typical large, liquid names shuffling back and forth in a notable amount of dealer-to-dealer trades, a New York-based sellside trader said.

The reason behind that could also be related to the need to revise stale positions or traders seeing quick profit opportunities, the sellsider said.

UBS-Stillwater treads water

The new UBS-Stillwater 9.375% mandatory exchangeable notes traded at 25 bid, 25.25 offered early on in the session, with a New York-based sellside desk analyst reporting a trade at that level versus a $19.20 share price.

Late in the day they traded outright slightly above par at about 25.125, according to a New York-based sellside trader.

The new paper held up compared to a slide in the underlying shares, but nevertheless, "no one cares," he said.

"Nobody was involved and nobody wanted to be involved. I am not a big fan of mandatories, and it may have been as simple as that," the sellsider said.

The after-market pricing was similar to trade action in the new Wintrust Financial Corp. 7.5% tangible equity units, which priced Tuesday. The Wintrust convertibles traded near their 50 par at 50.20 bid, 50.50 offered for much of the session despite a slide in the underlying common shares.

The mandatories priced toward the rich end of dividend talk, which was 9.25% to 9.75%, and at the midpoint of premium talk, which was 15% to 20%.

The new exchangeables priced concurrently with a $721 million secondary offering of common stock.

The combined sale was expected to encompass 49.8 million shares, which was equal to 51% of shares outstanding and represents Norimet's entire position.

UBS purchased underlying shares from the seller and repackaged them as mandatory exchangeables. Stillwater Mining will not receive any proceeds from either transaction.

UBS AG is Switzerland's biggest bank.

Stillwater Mining is a Billings, Mont.-based palladium and platinum producer.

RTI looks cheap

Early Wednesday, RTI launched a $175 million offering of five-year convertibles that was talked at a coupon of 3% to 3.5% with an initial conversion premium of 27.5% to 32.5%.

At the midpoint of talk, sources said that the paper looked between 4% and 6% cheap.

The paper was reportedly upsized to $225 million due to strong demand, but that could not be confirmed, and it wasn't known if the talked terms might also be revised.

It was seen in the gray market at 103, according to a Connecticut-based sellside analyst.

The registered deal has a 15%, or $26.25 million greenshoe, and was being sold via FBR Capital Markets & Co. and Citi acting as joint bookrunners. Co-managers are Comerica Securities, KeyBanc Capital Markets and PNC Capital Markets LLC.

Investors were said to be in favor of the five-year bullet structure and liked the fact that it was an understandable business with positive free cash flow and no borrow problem.

RTI International is a Pittsburgh-based producer of titanium mill products, and proceeds are earmarked for working capital and general corporate purposes.

"It looks like a good deal, and it models cheap. The stock has good potential, and management said it has passed the trough in sales and EBITDA ahead of the cycle and it sees the broader cycle coming back," the sellside analyst said.

A second sellsider said that despite the fact that it's a cyclical name and the stock has been back and forth, investors appeared to be favorably disposed to the issue, and he predicted that it would price at the rich end of talk.

SWS quiet ahead of pricing

The planned offering of convertibles of SWS Group, a financial company, was quiet ahead of pricing expected after the close on Wednesday.

Shares of the Dallas securities and banking company slid 21 cents, or 5.1%, to $3.91 in heavy volume, however.

The planned paper was talked at a yield of 6% to 7.5% with an initial conversion premium of 20% to 30%.

A New York-based sellside trader said that he thought the offering looked unfavorable given that it was a comparatively large issue for the size of the company, which didn't yet have any assets.

The concurrent IPO means that there is no stock borrow to start. The situation was similar with the General Motors Corp. mandatories that priced a few weeks back, but the size and scope of that issue was different.

"I'm not sure who the natural buyers are" of the SWS deal, a New York-based sellside trader said. He surmised that some kind of distressed, multi-strategy hedge funds would play, but not a lot of traditional convert players.

"Nobody mentioned it to me," the sellsider said.

The registered, off-the-shelf offering has an over-allotment option for up to $14.25 million of additional notes.

The notes will be non-callable for three years and then provisionally callable subject to a 130% price hurdle.

Bank of America Merrill Lynch is the bookrunner for the offering.

Proceeds will be used as a capital contribution to its banking subsidiary, and any remaining proceeds will be for general corporate purposes.

Mentioned in this article:

Radian Group Inc. NYSE: RDN

RTI International Metals Inc. NYSE: RTI

Stillwater Mining Co. NYSE: SWC

SWS Group Inc. NYSE: SWS

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