ADC opens flat; Washington Mutual sees heavy action; Pier 1 rise continues

By Evan Weinberger

New York, Dec. 20 - ADC Telecommunications Inc. brought two tranches of new convertible subordinated notes to market Thursday. They opened flat.

Washington Mutual Inc. preferreds were active all day.

E*Trade Financial Corp. equity units slipped.

Pier 1 Imports Inc. convertibles continued their rally.

The holiday hold took charge Thursday, and market watchers saw little activity on the day.

"Absolutely nothing. I wish I could tell you more," a trader said when asked to describe the day's activity.

Uncertainty in the market is adding to the usual holiday slowdown, a longtime analyst said. "There's no question that there's both of these things going on," he said. "I was talking to a portfolio manager yesterday who told me he didn't know what to do next."

Other than ADC, no new issues hit the tape and none were launched Thursday.

Equity markets had a volatile day, but one report of strong earnings wound up defeating two reports of bad news.

Business software maker Oracle Corp. announced the strong earnings, while Bear Stearns reported its first ever quarterly loss and the world's largest bond insurer, MBIA Inc., announced it had $30.6 billion in exposure to mortgage-related securities. MBIA's market capitalization is $6.5 billion.

The Dow Jones Industrial Average picked up 38.37 points, or 0.29%, to close at 13,245.64.

The Nasdaq added 39.85 points, or 1.53%, for a 2,640.86 close.

And the S&P 500 gained 7.12 points, or 0.49%, for a 1,460.12 close.

ADC gets put on hold

Minneapolis-based telecommunications firm ADC priced $400 million in convertible subordinated notes in two tranches Wednesday after the market close.

The first tranche of $200 million due July 15, 2015 carries a 3.5% coupon and a 75% initial conversion premium. They came in at the rich end of talk, which had been a 3.25% to 3.75% coupon and a 70% to 75% initial conversion premium.

The second tranche of $200 million due July 15, 2017 carries a 3.5% coupon and an 85% initial conversion premium. They came in at the rich end of talk, which was for a 3.25% to 3.75% coupon and a 70% to 75% initial conversion premium.

Each tranche of the Securities and Exchange Commission registered transaction comes with a $25 million greenshoe.

Settlement is expected to be Dec. 26.

They didn't see much action on the day, however, as the deal's structure put one class of investors essentially on the sideline. "This structure is made for hedgers only," a trader said.

The 2015 tranche has a $27 conversion price and an initial conversion ratio of 37.0336, which can be adjusted by up to 27.7752 if the price of ADC common stock exceeds the base conversion price subject to a specified formula.

The 2017 tranche has a $28.55 conversion price and an initial conversion ratio of 35.0318, which can be adjusted by up to 29.7770 if the price of ADC common stock exceeds the base conversion price subject to a specified formula.

The convertibles opened about a quarter-point higher, but an analyst said he saw them "drifting lower" over the course of the day.

In the end, a fund manager said he saw both tranches close the day just above par versus a closing stock price of $15.22.

ADC stock (Nasdaq: ADCT) fell 21 cents, or 1.36%, on the day.

ADC plans to use the proceeds to repurchase outstanding convertibles and for general corporate purposes and strategic opportunities.

WaMu active, down

Traders reported seeing notable action in Seattle-based commercial bank and lending institution Washington Mutual Thursday.

There was little news out on Washington Mutual, and in fact the stock closed up. An analyst speculated that it was funds trying to get the preferreds off their books before the new year.

"If you have a big piece to move, you're running out of time," an analyst said. "If one fund decides to buy or sell something, that's all it takes sometimes to make it look like there's a lot of volume out there."

Washington Mutual's 7.75% series R non-cumulative perpetual convertible preferred stock closed Thursday at $927.904 versus a closing stock price of $14.67. They closed Wednesday at $940 versus a stock price of $14.42.

Washington Mutual's 5.375% PIES due 2041 closed Thursday at 29.75 versus a stock price of $14.67. They closed Wednesday at 30.75 versus a stock price of $14.42.

Washington Mutual stock (NYSE: WM) gained 25 cents, or 1.73%, on the day.

E*Trade slips

New York-based online banking and brokerage house E*Trade saw its 6.125% common equity units due Nov. 18, 2008 close Thursday at $5.86 versus a closing stock price of $3.37. They closed Wednesday at $6.09 versus a stock price of $3.58.

E*Trade stock (Nasdaq: ETFC) fell 21 cents, or 5.87%, on the day.

Pier 1 continues surge

Fort Worth, Texas-based home furnishing retailer Pier 1 narrowed its third-quarter loss by $10 million over the same period last year, the company announced Thursday.

The company presented that news as proof its turnaround plan and belt tightening was working.

Pier 1's convertibles had been rallying earlier in the week in anticipation of the earnings announcement, and that continued Thursday.

Pier 1's 6.375% convertible senior notes due Feb. 15, 2036 closed Thursday at 84.4331 versus a closing stock price of $5.30. They closed Wednesday at 79.6704 versus a stock price of $3.95.

Pier 1 stock (NYSE: PIR) gained $1.35, or 34.18%, on the day.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.