New Campus Crest adds on debut, but shares dive at close; AMR moving up; Tower Group firm

By Rebecca Melvin

New York, Oct. 4 - Campus Crest Communities Inc.'s newly priced 4.75% exchangeables added in the secondary market early Friday after the Charlotte, N.C.-based student housing properties company priced an upsized $85 million of the five-year exchangeables at the cheap end of coupon talk.

The new Campus Crest senior notes traded up to 102 bid, 102.5 offered in early action after an initial market of 101 bid, 102 offered, syndicate sources said. That was versus a share price that was up a dime, or 1%, at $10.15. But shares took a dive into the market close, ending down a nickel, or 0.5%, at $10.00.

Elsewhere AMR Corp.'s 6.25% convertibles due 2014 strengthened in active trade, market players said.

The Fort Worth, Texas-based airline's shares were reinstated with an "outperform" by Wolfe Research, which said its reinstatement was based on its expectation that the company's proposed merger with US Airways Group Inc. will ultimately be sealed.

Tower Group International Ltd.'s convertibles, which were a feature in the secondary market all week, were firm on Friday and seen at 95.5 bid, 96.5 offered as investors await results of the insurance company's delayed quarterly report expected next week.

Molycorp Inc.'s convertibles were "moving around" Friday in continuing action spurred by the rare earths minerals company's news this week that it expects commissioning of units at the Mountain Pass, Calif., plant for production to begin in the fourth quarter.

Molycorp's 3.25% convertibles were trading at 74.5 bid, 75.5 offered. That was up from about 73 before the stock sold off, and up from 70 bid, 72 offered on Monday, a New York-based trader said.

Convertibles were mostly stronger on Friday with higher shares, but for the week, the convertibles market was described as mixed with trading directed by name-specific news and situations, a trader said.

"High yield is moving up a little despite equity moving down [for the week], and convertibles are mixed name by name," the trader said.

The U.S. budget stalemate showed no signs of being resolved Friday even as the partial government shutdown stretched to four days and a deadline loomed for raising the debt ceiling.

Equities were lower for the week but higher on Friday. The S&P 500 stock index added 11.84 points, or 0.7%, to 1,690.50; the Dow Jones industrial average gained 76.10 points, or 0.5%, to 15,072.58; and the Nasdaq stock market gained 33.41 points, or 0.9%, to 3,807.75.

Besides Campus Crest there were no new issues in the U.S. market, but internationally Spain's ACS Actividades de Construccion y Servicios SA launched and priced an upsized €721.1 million five-year bonds exchangeable for shares of Iberdrola SA.

The 2.625% exchangeables priced at par and have a 35% initial exchange premium. The terms represent the rich end of talk on a deal that was about five times oversubscribed.

Madrid-based ACS is an infrastructure and civil works construction and services company, while Iberdrola is a utility located in Bilbao, Spain.

Campus Crest adds on debut

Campus Crest's newly priced 4.75% exchangeables traded up to 102 bid, 102.5 offered in early action, after an initial market of 101 bid, 102 offered, syndicate sources said. That was versus a share price that was up a dime, or 1%, at $10.15. Shares ended the session down, however, at $10.00, which was off 5 cents, or 0.5%.

The company priced an upsized $85 million of the five-year exchangeables at the cheap end of coupon talk, which was 4.25% to 4.75%, and at the midpoint of 22.5% to 27.5% talk for the initial conversion premium.

The Rule 144A deal was initially talked at $75 million in size.

The greenshoe was upsized to $15 million from $11.25 million.

Barclays, Citigroup Global Markets Inc. and BofA Merrill Lynch were the active bookrunners, and Raymond James & Associates Inc. and RBC Capital Markets LLC were the passive bookrunners.

The exchangeables are non-callable for five years with no puts. There is contingent conversion if shares reach 130% of the conversion price, and also net share settlement.

The developer and real estate investment trust for student housing properties will use proceeds to repay debt, future development or other general corporate and working capital purposes.

AMR 'crawling higher'

AMR's 6.25% convertibles due 2014 traded up to 109 bid, 110 offered on Friday, which was up about a point on the day, market players said. AMR's over-the-counter traded shares jumped 45 cents, or nearly 10%, to $5.04.

"They are crawling higher," a trader said.

Wolfe Research, which suspended its rating on AMR when it filed for bankruptcy at the end of 2011 but didn't drop coverage, reinstated the company's shares at an "outperform" rating and a price target of $11.00, citing its "belief that an AMR/LCC merger will occur (to which we roughly assign a 75% probability)."

Its conviction is based on analysis of antitrust precedent, recent favorable decisions from judge Kollar-Kotelly, a compressed discovery process for regulators, the recent settlement with the Texas Attorney General, and "most importantly, the frail complaint on which the Department of Justice's case is based," the research firm stated.

Mentioned in this article:

AMR Corp. Pink sheets: AAMRQ

Campus Crest Communities Inc. NYSE: CCG

Molycorp Inc. NYSE: MCP

Tower Group International Ltd. Nasdaq: TWGP

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