Morning Commentary: Kaman 3.25% convertibles in focus; many underlying shares gain

By Rebecca Melvin

New York, Aug. 29 – The underlying shares of many convertible notes were sharply higher in the early going on Thursday.

The shares of Vishay Intertechnology Inc., Transocean Inc. and Ensco plc were sporting better than 5% gains, and the convertibles of those companies have been active.

Meanwhile, Kaman Corp. announced that holders of its $200 million of 3.25% convertible senior notes due 2024 may put their notes for par plus interest or convert into shares and cash as the result of a fundamental change.

Market players were considering whether holders will put or convert.

“I think it depends on where stock is as we get closer to the deadline. According to offer details, the conversion ratio adjusted for fundamental change is 18.0709. With Kaman stock around $57.30, parity equals about 103.50,” a New York-based market source said. “But you’ll probably lose the accrued on conversion, which is presently 1.1 pts, and which will be 1.3 pts on Sept. 26. So, your indifference point is probably just north of $56 in stock.”

The Bloomfield, Conn.-based maker of proprietary aircraft bearings and components announced the offer on Thursday following the close of its previously announced share purchase agreement for the company among Kaman, LJ KIT Blocker, Inc., LJ KAI Blocker, Inc. and LJ KFP Blocker Inc.

In economic news, the Commerce Department on Thursday revised slightly lower its estimate of overall second-quarter economic growth to an annual rate of 2.0%, compared to the previous estimate of 2.1%. Weighing on growth were the housing sector, exports and inventory investment and a pullback in business spending, while consumer spending was a boost. Data from the third quarter so far indicate the manufacturing sector continued to struggle as U.S. industrial output fell in July.

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