Morning Commentary: American Tower on tap with $1.25 billion mandatory; secondary softens

By Rebecca Melvin

New York, Feb. 24 – American Tower Corp. joined the U.S. convertibles calendar early Tuesday with plans to price $1.25 billion of mandatory convertible preferred shares on Wednesday.

The American Tower deal will follow on the heels of Actavis plc’s planned $4.2 billion of mandatory convertible preferreds seen pricing Tuesday night.

One market source said he was hearing people selling things to make room for the new deals. A second source said there was “a little bit of weakness, but nothing substantial.”

“Weakness should be bought,” the second source said, given what is happening in the straight bond markets and equities, where everything is to buy.

Yahoo! Inc.’s 0% convertibles due 2018 were at 107 versus a share price of $43.43 in the early going. That paper has come in about 0.75 point in the past week as some have sold it to make room for the new mandatories. “This looks cheap at this level,” the source said

Elsewhere, Depomed Inc.’s 2.5% convertibles due 2021 traded at 130.688, which was up 6.7 points on the day, according to Trace data. The Newark, Calif.-based specialty pharmaceutical company reported fourth-quarter earnings that were better than expected, and Depomed shares, which have been on a tear this year, jumped 10% in the early going.

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