Thornburg launches preferreds; Schering-Plough, other biotechs active; Sirius starts truckin'

By Evan Weinberger

New York, Aug. 30 - Thornburg Mortgage, Inc. bucked the recent trend, and usual pre-Labor Day blockage, by pricing $500 million in cumulative convertible stock Thursday.

In other trading, Schering-Plough Corp.'s 6% mandatory convertible preferred stock and convertibles issued by PDL BioPharma, Inc., Ocwen Financial Inc., Omnicare Inc. and Sirius Satellite Radio Inc. were all relatively active Thursday.

With Labor Day coming up and end-of-the-month bookkeeping keeping people relatively busy, most traders had their minds fixed on the U.S. Open, Yankee baseball and the opening of the college football season Thursday night.

"I think people went back on vacation," a trader said. "You've got the end of the month coming up. People are just hoping that it stays where it is, and that it doesn't get any worse."

Along with Thornburg's new preferreds, which have a minimum 10% dividend and an initial conversion premium of 3%, China Wheel Holdings, Ltd. closed $25 million in convertible bonds. China Wheel is a Guangzhou, China-based maker of aluminum alloy automobile wheels, and the convertibles, which have a conversion price of S$1.045, will be listed on the Singapore Stock Exchange.

While the China Wheel convertibles may have provoked activity on the Singapore exchange, the markets in the United States wobbled in light trading. A weaker-than-expected gross domestic product rise of 4% in the second quarter propped up mostly by business investment rather than consumer spending and a surprising increase in jobless claims kept the Dow Jones Industrial Average lower throughout Thursday. The Dow lost 50.56 points, or 0.38%, to close at 13,238.73.

The Nasdaq fluctuated all day and ended up gaining 2.14 points, or 0.08%, for a close at 2,565.30. The Standard & Poor's 500 closed at 1,457.64, a dip of 6.12 points, or 0.42%.

Thornburg preferreds to add liquidity

Thornburg Mortgage, the troubled Santa Fe, N.M.-based home lender that specializes in jumbo adjustable-rate mortgages, priced $500 million in cumulative convertible preferred stock.

The preferreds pay out a minimum 10% dividend and have a 3% initial conversion premium. The conversion price was set at $11.50 based on Thornburg's closing price (NYSE: TMA) of $11.16 Wednesday. Thornburg stock closed above the conversion price, at $11.81. That represents a gain of 65 cents, or 5.82%, Thursday. Thornburg's junk bonds also traded higher in light activity.

Thornburg has been walloped during the August credit crunch, with its stock tumbling by more than half since the beginning of the crunch. "This company brought a convertible preferred deal in June of this year [an offering of 7.5% convertible preferred stock]," one analyst said. "Its conversion price is $32.37. How the mighty have fallen."

Market players seemed to be pleased by the preferreds' terms - high dividend, low conversion premium - and were not put off by the company's recent struggles. "It is so hard for mortgage lenders to raise money right now and I think it gives investors an amazing amount of confidence that they were able to do so, and at a premium," a sellside trader said. "It really does go a long way to helping them turn their situation around."

Not everyone was quite as impressed with Thornburg's move. "This is clearly a distress issuance. They needed the money, and they needed it now," an analyst said.

Thornburg says the $500 million will allow it to improve its liquidity. The deal comes on the heals of Thornburg's Aug. 20 sale of $20.5 billion in mortgage-backed securities and other moves meant to improve liquidity and lessen the company's exposure to market fluctuations.

Still, given the state of the company, another sellside trader said that investors should look closely at the Thornburg preferreds. Although the trader wanted to see a higher dividend based on the performance of previous Thornburg issues, the presence of voting rights on the preferreds and other features kept him interested. "At this point if you own common, sell it, buy the preferreds," he said.

In other mortgage-related convertibles trading, West Palm Beach, Fla.-based Ocwen Financial saw its 3.25% convertible senior unsecured notes due Aug. 1, 2024 close Thursday at 92.75 versus a closing stock price of $8.97. The convertibles closed Wednesday at 94 versus a stock price of $9.33.

Stock in Ocwen (NYSE: OCN), which provides information and other services to the lending industry, dropped 36 cents, or 3.86%.

Pharmaceuticals move

Market activity slowed Thursday, but there were a few notable names changing hands on the day, especially in pharmaceuticals and biotech.

Schering-Plough's 6% mandatory convertible preferred stock due Aug. 10, 2013 rose $1.83, or 0.70%, for a close at $265.05. The mandatories trade on the New York Stock Exchange under the symbol SGP-PB.

Stock in the Kenilworth, N.J.-based pharmaceuticals company (NYSE: SGP) slipped 25 cents, or 0.83%, for a close of $29.90 on the day.

Another active pharmaceutical Thursday was PDL Biopharma. On the heels of a reorganization announcement earlier in the week, PDL's 0.75% subordinated convertible notes due Aug. 16, 2023 closed at 106.25 versus a closing stock price of $18.80. They closed Wednesday at 106.375 versus an $18.80 share price.

Stock in the Fremont, Calif.-based biotech (Nasdaq: PDLI) was unchanged from Wednesday.

Staying in pharmaceuticals, Covington, Ky.-based Omnicare, which provides pharmaceutical services for seniors, saw its 3.25% convertible senior debentures due Dec. 15, 2035 close at 77.5 versus a closing stock price of $32.56. They slipped slightly from Wednesday's close of 77.625 versus a stock price of $32.67.

Omnicare stock (NYSE: OCR) dribbled 11 cents, or 0.34%, on the day.

Sirius stock goes on tour

Maybe it was the announcement that Sirius Satellite Radio was launching a 24-hour Grateful Dead channel that made convertibles investors high on the company's 3.25% convertible senior debentures due Dec. 15, 2035.

Whatever was in the air, the New York-based company's convertibles moved up to 86.5 versus a closing stock price of $2.92. They closed Wednesday at 85.875 versus a stock price of $2.84.

Sirius stock (Nasdaq: SIRI) picked up 8 cents, or 2.82%, on the day.

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