Terex, Take-Two surge on debuts; Penson quiet; GM gains more; Hertz, Wyndham, Allegheny firm

By Kenneth Lim

Boston, May 29 - New deals dominated activity in the convertible markets Friday as three new offerings made their debuts on the secondary market.

Terex Corp. surged upwards in the morning after its deal arrived at the rich end of talk, while Take-Two Interactive Software Inc. also got an early pop. Take-Two upsized its deal by 20%.

Penson Worldwide, Inc. also began secondary trading on Friday, but the small $50 million offering had a quiet start.

General Motors Corp. continued to be lively, its convertibles gaining even as the company teetered on the brink of bankruptcy.

The market in general was active in the morning, but trading slowed in the afternoon as is typical for Fridays, market sources said.

"Guys are getting ready to go home," a sellside trader said just after noon.

Some of the recent new deals remained active and afloat.

Hertz Global Holdings Inc.'s 5.25% convertible due 2014 traded at 101 versus a common stock price of $6.80. Its common stock closed at $6.85, up by 3.47% or $0.23.

Hertz is a Park Ridge, N.J.-based car and equipment rental company.

Wyndham Worldwide Corp.'s 3.5% convertible due 2012 changed hands at 107.5 against an $11.25 common stock price. The stock was up 4.52%, or $0.51, at $11.79 at the close Friday.

Wyndham is a New Jersey, N.J.-based hospitality company.

Allegheny Technologies Inc.'s 4.25% convertible due 2014 was active at 107 versus a common stock price of $34.25. The common stock added 5.83%, or $1.95, on Friday to finish at $35.41.

Allegheny is a Pittsburgh-based specialty metals producer.

"I think most of the recent deals haven't been too bad," the trader said. "They're still doing well."

Terex starts strong

Terex's new 4% convertible senior notes due 2015 got off to a quick start Friday, trading at 107 early in the day but quieting down in the afternoon.

The notes were offered at par. Terex common stock closed at $13.42, down by 1.47% or $0.20.

The company priced its $150 million offering on Thursday after the market closed at the rich end of talk with an initial conversion premium of 25% over a concurrent stock offering price of $13.

Priced talk was at a coupon of 4% to 4.5% and an initial conversion premium of 20% to 25%, market sources said.

There is an over-allotment option for an additional $22.5 million.

Credit Suisse, Citi and UBS Investment Bank are the bookrunners of the registered off-the-shelf offering.

The company concurrently priced $300 million of senior notes due 2016 at a coupon of 10.875% and $143 million, or 11 million shares at about $13 apiece, of its common stock. The common stock offering has a greenshoe of an additional 1.65 million shares, or about $21.45 million.

Proceeds of the debt and equity offerings will be used to pay down outstanding amounts under a senior credit facility and for general corporate purposes.

Terex is a Westport, Conn.-based maker of industrial equipment.

"They were priced cheap, in terms of spread, vol," a convertibles analyst said. "There's plenty of stock to borrow, plenty of liquidity, they're improving their capital structure."

Take-Two upsizes

Take-Two nailed its performance on its first take, opening at 106.5 on its initial day of secondary trading.

The common stock also gained by 1.05%, or $0.09, to close at $8.63.

"I'm sure the stock helped, but come on, it's plus 6. It was priced cheap," a convertible trader said. "If they didn't issue more, it would have been even higher."

Take-Two priced the upsized $120 million offering of five-year convertible senior unsecured notes on Thursday after the market closed near the rich end of talk to yield 4.375% with an initial conversion premium of 25%.

The deal amount was originally $100 million. Price talk was at a coupon of 4.25% to 4.75% and an initial conversion premium of 20% to 25%.

The notes were offered at par.

Bookrunners Barclays Capital Inc. and J.P. Morgan Securities Inc. have an over-allotment option for an additional $18 million in the registered off-the-shelf offering. The greenshoe was originally for $15 million.

Take-Two is a New York-based game software developer.

Penson makes quiet start

Penson's new 8% convertible senior notes due 2014 were not seen actively trading after the deal priced at the midpoint of price talk.

The $50 million offering priced Thursday after the close with an initial conversion premium of 15%. Price talk was at a coupon of 7.75% to 8.25% and an initial conversion premium of 12.5% to 17.5%, market sources said.

There is an over-allotment option for an additional $10 million.

JPMorgan is the bookrunner for the Rule 144A offering.

Proceeds will be used to pay down some of the company's existing $70 million of corporate debt, to provide working capital and for other general corporate purposes.

Penson is a Dallas-based securities clearing firm.

The deal is likely to remain quiet in the secondary market, a sellside desk analyst said.

"I doubt we'll trade that much, just because it's only $50 million," the analyst said.

GM gains further

General Motors' convertible bonds continued to improve slightly on Friday on optimism about the company's ability to quickly emerge from bankruptcy, market sources said.

The General Motors 5.25% convertible due 2032 and its 6.25% convertible due 2032 were both an eighth-point higher at 2.5, while the 1.5% convertible due June 1, 2009 also gained an eighth-point to trade at 2.80.

General Motors common stock closed at $0.75, down by 33.04% or $0.37.

"This is it," a sellside trader said. "They're going to file Chapter 11 by Monday, these will eventually be taken out, guys will be holding the new shares. I think that's why you're kind of seeing all the prices converge. It's at bankruptcy pricing now."

The trader said the bonds were moving higher because of expectations that the bankruptcy could be a relatively swift process.

"The faster they come out of Chapter 11, the earlier you'll see your new shares grow, if they grow at all," the trader said.

Detroit-based General Motors on Friday said it had won some concessions from the United Auto Workers union. On Thursday, the automaker said a committee of bondholders had accepted a sweetened exchange offer for its unsecured bonds. The auto maker will give holders of $27 billion of debt warrants for a 15% equity stake in a reorganized General Motors in addition to the 10% equity stake originally offered.

Mentioned in this article

Allegheny Technologies Inc. NYSE: ATI

General Motors Corp. NYSE: GM

Hertz Global Holdings Inc. NYSE: HTZ

Penson Worldwide, Inc. Nasdaq: PNSN

Take-Two Interactive Software Inc. Nasdaq: TTWO

Terex Corp. NYSE: TEX

Wyndham Worldwide Corp. NYSE: WYN

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