Convertibles strengthen; Best Buy, Transocean, Trina move higher; Newell extends gains; Amkor prices

By Rebecca Melvin

New York, March 26 - Amkor Technology Inc.'s planned new issue of $240 million of five-year convertibles wasn't heard in the gray market Thursday as demand was tempered by the company's chief executive buying most of the deal, concerns about the credit and a difficult borrow, convertible players said.

Amkor's existing 2.5% convertibles due 2011 jumped higher during the session, however.

The new Amkor paper priced after the close at the rich end of talk at a coupon of 6% and an initial conversion premium of 15%.

Elsewhere, Best Buy Co. convertibles jumped, along with its underlying shares, after the consumer electronics retailer posted better than expected quarterly results and a positive outlook.

Transocean Inc., which is always a liquid name in the convertibles market, has been even more active than normal in the past several sessions, creeping upward even though its shares tapered off Thursday.

Trina Solar Inc. was a notable gainer as the solar power sector was ramping upward, a Connecticut-based sellsider said.

Newell Rubbermaid Inc.'s new convertibles extended gains notched on their debut in secondary market trading Wednesday. One sellsider said they traded at 112.5 versus a stock price of $6.60.

Overall convertibles were higher in tandem with the broader markets that strengthened Thursday as investors focused on positive earnings news and strong demand for government debt at the Treasury auction.

Meanwhile, Treasury secretary Timothy Geithner highlighted for members of Congress elements of the administration's plan to expand regulation of the financial system.

Among new rules being proposed, aimed at mitigating systemic risk, are: requiring larger hedge funds to register with the Securities and Exchange Commission, creating a "systemic risk regulator" to monitor the biggest institutions; and giving the administration expanded powers to take over major nonbank financial institutions, such as insurance companies and hedge funds, that are at risk of a financial collapse.

Amkor prices rich

Amkor's new convertibles came on the rich end of talk, and Amkor's existing 2.5% convertibles due 2011 traded up about 12 points to 74, according to market sources.

One sellside trader said the 2.5% paper had traded as high as 78.

Of the existing paper, Amkor has repurchased about $111 million since the end of September leaving not much outstanding of the original $190 million issue priced in 2006.

It had been trading at a 28% yield to maturity.

Of the new issue, more than half, or $150 million of the convertibles, was purchased by James J. Kim, Amkor's chairman and chief executive and Amkor's largest shareholder, and entities controlled by Kim.

There was strong demand for the remaining $90 million left for qualified institutional buyers under Rule 144A, a syndicate source said. Even though this was only a one-day deal, it had been talked about previously, he said.

Prior to final pricing, a Connecticut-based sellside analyst said the new deal modeled "fair" based on a reduced borrow, and using Treasuries plus 1,700 basis points for a credit spread and capping volatility at 45%.

There is a $10 million greenshoe.

Citigroup and Deutsche Bank were joint book runners of the offering.

Chandler, Ariz.-based Amkor, a semiconductor test and assembly service provider, is using proceeds to repay debt and for general corporate purposes.

Best Buy jumps

Best Buy's 2.25% convertibles due 2022 jumped in active trade Thursday, trading at 99.25 versus a share price of $39 at one point, and seen closing slightly off that level at 98.5 versus a closing share price of $37.67.

Previously the bonds had been in the range of 91 to 93.

The Richfield, Minn.-based retailer posted a 23% drop in quarterly profit but shares rose because it beat estimates.

Consumer demand was stronger than expected and sales and traffic improved as the quarter progressed in the fourth quarter, according to the company.

For the fourth quarter ended Feb.28, earnings came to $570 million, or $1.35 a share, down from $737 million, or $1.71 a share, a year earlier.

Excluding restructuring and impairment charges, Best Buy said adjusted earnings were $1.61 per share. Analysts had been expecting it to earn $1.40 per share.

For the full year, Best Buy expects revenue of $46.5 billion to $48.5 billion, and same-store sales to be flat to down 5%.

Best Buy forecast earnings of $2.50 to $2.90 per share for the current fiscal year, which bettered analysts' estimates, which had been $2.45 per share.

Transocean mostly holds gains

Transocean's 1.625% convertible series A due 2037 traded last at 92, versus a share price of $63.98, holding firm against earlier trades when the share price was slightly higher.

The Transocean 1.5% convertibles series B due 2037 were last at 86.75, off slightly from an earlier trade Thursday at 87.

But Transocean's 1.5% convertibles series C due 2037 ended at 83.75, down from an earlier 85.

Common shares of the Houston-based offshore drilling contractor declined by 57 cents, or 0.9%, to $63.98.

About 35 million bonds traded among the three issues on Thursday, a West Coast-based sellsider said.

The activity was probably spurred by a combination of oil being up and credit being better, the sellsider said.

Crude oil for May delivery climbed $1.57, or 3%, to $54.34 a barrel on the New York Mercantile Exchange.

Mentioned in this article:

Amkor Technology Inc. Nasdaq: AMKR

Best Buy Co. NYSE: BBY

Newell Rubbermaid Inc. NYSE: NWL

Transocean Inc. NYSE: RIG

Trina Solar Inc. NYSE: TLS

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