Good to hear OG picking up GLW--GLW has a convertable bond
offering. those can be great ways of getting the bond
part of one's portfolio to outperform.
In fact CHTR is issuing notes offering 5.75% with the option to convert to common @ 21 and change, if CHRT
were to go to 26-30 over the next 2 years, you could
make a nice return, with the yield coming in even if the
stock does not move.
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DJ Convertible Corner: Corning On Road Despite Fiber Fall
Dow Jones News Service ~ October 26, 2000 ~ 1:09 pm EST
By Jennifer Ablan
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Some surprisingly disappointing earnings in the fiber- optics sector won't keep star Corning Inc. (GLW) from bringing a $1.2 billion convertible debt deal next week.
Corning, based in Corning, New York, is "out doing a roadshow as we speak," said an investor relations officer at Corning Thursday.
Corning is shopping a 15-year zero-coupon convertible offering, lead managed by Goldman Sachs & Co. As it stands, price talk on the deal has not been changed as a result of the nervous equity markets.
Corning's convertibles are expected to include a yield-to-maturity between 2.5% and 3%, according to underwriters.
In addition, the convertibles will include a conversion premium of 21% to 25%, which means that the convertibles will give the investor an option to purchase the underlying shares at a price 21% to 25% above the stock price when the convertible bonds were issued.
Corning's stock price Thursday was trading at 69, down 7 7/8 points, or 10.2%. The stock tumbled 16 5/8 points Wednesday, after the fiber-optic sector got a jolt from Nortel Networks Corp. (NT).
Nortel Networks reported sales that disappointed fiber-optics equipment investors and its stock fell 18 7/16 points, nearly 30%, to close Wednesday at 44 7/8. It's down another 1 1/2 points Thursday.
The selling spilled over into the technology-laden convertible market. The Bear Stearns All Convertible Index dropped 2.29% Wednesday, bringing its year- to-date loss to 5.16%.
Convertibles are hybrid securities, paying either coupons like bonds or dividends like preferred shares. They are exchangeable at the option of the holder into common stock. Convertibles track the equity markets, so a dip or rally in the Dow Jones industrials and Nasdaq Composite Index would drag or lift the convertible-bond market.
High Grade Credit
Corning is an investment-grade rated company with an A2 credit standing of its senior unsecured notes and long-term debt by Moody's Investors Service. That's likely to be a strong selling point to investors gun-shy of non-investment grade, highly-speculative credits.
Corning's convertible deal is "extremely cheap and even it weren't in a hot sector, the pricing is very attractive," said Maren Lindstrom, convertibles portfolio manager at Lord Abbett & Co. in Jersey City, N.J.
"Corning is definitely in a sweet spot and sector in the market right now," echoed Nicholas Calamos, managing director of Calamos Asset Management in Naperville, Ill.
Corning is one of the world's leading producers of fiber-optic cable. It also produces, among other things, fiber-optic components, liquid crystal display glass, projection video lenses and laboratory equipment.
Corning will use the proceeds from the convertibles deal along with the issuance of 30 million shares of its common stock to pay for its acquisition of Pirelli S.p.A's 90% interest in Optical Technologies USA and for general corporate purposes.
On Sept. 27, Corning said it planned to buy Pirelli's stake in its optical components and devices business for $3.6 billion cash. The remaining 10% of the company is owned by Cisco Systems Inc. (CSCO). Corning expects the purchase to close in the fourth quarter.
Earlier this week, Corning said third-quarter revenue and profit jumped substantially from a year earlier.
Optical-networking companies design, develop and manufacture technologies, products and services for use in voice and data communications systems. These companies are developing new technologies and services aimed at eliminating bottlenecks that hamper telecommunications networks and Internet usage.
Can Allergan?
The convertible-bond market has seen a sea-change in its willingness to take on risk because of disappointing earnings, business plan snafus and credit blowups.
As a result, it's a great opportunity for well-known, established companies to raise money at a relatively low cost.
In each of the last three months, the market has seen more than 30% of new offerings (proceeds) rated investment-grade, according to Salomon Smith Barney data.
Thursday, Allergan, Inc. (AGN) announced plans to issue $300 million of zero- coupon convertible bonds due 2020 via Merrill Lynch & Co. Allergan, an Irvine, Calif.-based maker of eye care and skin care products, is an investment-grade credit. Moody's rated Allergan's senior unsecured notes at A3.
The company is expected to fetch a yield-to-maturity between 2.5% and 3%, with conversion premium of 28% to 32%, according to investors looking at the transaction.
The offering is noncallable for three years and a put option in years three and 10, the investors said.
Jennifer Ablan; Dow Jones Newswires; 201-938-2047; jennifer.ablan@dowjones.com |
