Wyeth, Medtronic, Hologic trade; Bank of America lower, but Countrywide higher; MGIC prices

By Rebecca Melvin

New York, March 25 - The convertible bond market was mixed in fairly active trade on Tuesday, with a range of names in play that was more varied than has been the case in recent days, market players said.

In addition to the usual cast of financials, such as Bank of America Corp., which was down outright, and Countrywide Financial Corp., which was up, Wyeth, in the pharmaceutical sector, was trading, as was Medtronic Inc. and Hologic Inc. These names traded higher early in the session, but ended the day little changed or lower.

Peabody Energy Corp. and Suntech Power Holdings Co. Ltd. gained outright.

Traders said more liquid issues were trading. There was some index trading, including pharmaceuticals, and players got out of the mode of just "fishing for levels."

And while financials didn't dominate the trading day, they continued to have a significant presence, they said.

In the primary arena, the largest U.S. mortgage insurer MGIC Investment Corp. priced $325 million of 55-year convertibles to yield 9% with an initial conversion premium of 20%.

Meanwhile, mortgage lender and real-estate investment trust, Thornburg Mortgage Inc., scrapped plans announced last week for $1 billion of convertibles in favor of a private placement of up to $1.35 billion of subordinated senior secured notes.

The convertibles deal - which was viewed as a "seriously distressed" situation - was terminated after being postponed to Monday from Thursday. It had been for seven-year convertible subordinated senior secured notes to yield 12%, with an initial conversion premium 75% below the closing price of Thornburg common shares on March 18.

Wyeth, Medtronic and Hologic end flat to lower

Early in the session the Medtronic 1.5% convertibles and 1.25% convertibles traded at 105.75 and 105.5, respectively, versus a stock price of $48.50, according to a New York-based sellsider.

Then the bonds of the Minneapolis-based medical-device maker followed its shares to a close which was well off its highs, but still positive for the day.

The 1.5% convertibles due 2011 closed at 105.025, versus a stock price of $48.56 compared to a close of 105.488, versus a stock price of $46.54 on Monday.

The 1.625s due 2013 closed at 104.58, compared to 105.488; while the Medtronic 1.24% convertibles due 2021 closed at 99.25, compared to 99.27 on Monday.

Medtronic stock (NYSE: MDT), which hit a low for the year of $46.01 on Jan. 30, has stayed between $46.01 and $50.81 since then. On Tuesday, the stock closed up just two cents at $48.56.

Madison, N.J.-based Wyeth rose in early trade to as high as $42.30, but then sank by midmorning to negative territory. The Wyeth floaters, a Libor minus 50 bps convertible due 2024, were off 0.5 point outright to close at 100.5 compared to a 1.1% decline in its shares. Shares of Wyeth (NYSE: WYE) finished the day at $41.66.

The 2% convertibles of Hologic, the Bedford, Mass.-based medical technologies company, are generally traded actively as the $1.725 billion issue priced in December 2007 represents a liquid name in the market, with good volatility.

The 2% bonds due 2037 traded up at par early Tuesday versus a stock price of $58.625. But the paper closed nearly unchanged on the day at 99.2 compared to a stock price of $58.57, which was up 20 cents (Nasdaq: HOLX).

Countrywide up, BAC down

The convertibles of ailing mortgage lender Countrywide and its possible acquirer Bank of America continued to trade as speculation regarding that deal circulated. In the options market, April call options on Countrywide rose.

Bank of America's 7.25% perpetual preferred series L convertibles were trimmed to 1088, versus a share price of $40.07, compared to 1105.56, versus a share price of $42.45 on Monday.

But the loss wasn't as large as that taken by its shares. The Charlotte-based bank's stock (NYSE: BAC) closed down 3.5% at $40.07.

The Countrywide Libor minus 350 series A debentures due 2037 traded early at 89.9 and the Libor minus 225 series B debentures also due 2037 traded at 86.5, both up about a 0.5 point on the day dollar neutral.

Shares of Calabasas, Calif.-based Countrywide (NYSE: CFC) closed up 14 cents, or 2.28%, at $6.28.

MGIC rises in early trade

The new 9% convertibles of MGIC rose in early trade to 102.125 bid, 103.135 offered, but many hadn't seen it in trade. Syndicate sources wouldn't divulge the closing price level, so it wasn't known if the convertibles held up in the face of an 8% decline in its shares.

Banc of America Securities LLC was bookrunner for the offering.

It was attractively priced, according to one buysider, who anticipates many more examples of new issuance from the financial sector - where there is risk-laden opportunity, he said.

MGIC priced $325 million of 55-year convertible junior subordinated debentures to yield 9% with an initial conversion premium of 20%.

But while the initial conversion price at $13.50 is 20% higher than the $11.25 offering price, it is only 1.5% higher than the $13.30 last sale price.

The Rule 144A deal priced at the cheap end of talk, which was for a coupon of 8.5% to 9% and an initial conversion premium of 20% to 25%.

There is an over-allotment option for up to an additional $65 million.

The notes are call protected for five years, and then provisionally callable at a 130% hurdle. There are no puts.

Concurrent with the convertibles, MGIC priced an upsized $420 million of common stock, or 37.3 million shares, which is 20% more than the offering size previously announced. There is an option to purchase an additional 5.6 million shares at the same price.

MGIC is a Milwaukee-based mortgage lender. Its shares (NYSE: MTG) closed down $1.05, or 8%, at $12.25.

Thornburg scraps convertibles

Thornburg plans to complete a private placement of up to $1.35 billion of subordinated senior secured notes in lieu of a public offering of $1 billion of convertibles that was announced last week.

The new, proposed private placement is for 18% senior notes due 2015. The interest rate can be reduced to 12% if the company meets certain conditions.

Proceeds are intended to satisfy an agreement unveiled last week under which Thornburg agreed to raise a minimum of $948 million in new capital by March 27.

Under the new deal, Thornburg will also issue warrants to investors purchasing the notes, which effectively makes the placement like a convertible if the bond is usable to exercise the warrants, market sources said.

Each purchaser will initially receive detachable warrants to purchase shares of common stock, which are exercisable at a price of $0.01 per share, and which will be equal to about 48% of the then outstanding fully diluted equity of the company.

Thornburg is a Santa Fe, N.M.-based mortgage lender and real estate investment trust.

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