E*Trade down on cash infusion; MGI Pharma up as options search begins; WCI falls with housing prices

By Evan Weinberger

New York, Nov. 29 - MGI Pharma Inc., on the strength of a board announcement, and Suntech Power Holdings Co. Ltd. were big gainers Thursday.

On the other hand, E*Trade Financial Corp. and WCI Communities Inc. convertibles both fell in Thursday trading.

Countrywide Financial Corp., iStar Financial Inc. and Excel Maritime Carriers Ltd. were also higher on the day.

No new deals priced Thursday, and one potential new deal dropped its convertible component.

Washington-based government secured mortgage backer Freddie Mac announced that none of the $6 billion in non-cumulative perpetual preferred stock it announced Tuesday after the market close would be convertible. The original announcement said that a small portion of the issue would be done in convertible preferreds.

"They decided they did not want to dilute EPS and got a good reception for the non-convert issue," a market watcher said. "This is a positive for the stock." Freddie Mac stock posted a minimal rise on the day.

Equity markets posted marginal gains Thursday, especially when compared to the prior two days, which had the largest two-day gain in five years.

Markets wavered throughout the day as the Office of Federal Housing Enterprise Oversight reported that home prices dropped for the first time in 13 years in the third quarter and Citadel Investment Group pumped $2.55 billion into struggling E*Trade. E*Trade chief executive officer Mitchell H. Caplan resigned Thursday.

The Dow Jones Industrial Average moved up 22.28 points, or 0.17%, to 13,311.73.

The Nasdaq added 5.22 points, or 0.20%, for a 2,668.13 close.

The Standard & Poor's 500 closed at 1,469.72, a gain of 0.70 points, or 0.05%, on the day.

With Federal Reserve chairman Ben Bernanke scheduled to make a policy speech in Charlotte, N.C., Thursday night, market players differed over how the recent $7.5 billion investment in Citigroup by the Abu Dhabi government, the $6 billion raised by Freddie Mac and the Citadel investment in E*Trade would factor into the Fed's decision on interest rates in two weeks.

"If this continues - financing from private sources, from overseas - then the markets are working," a trader said. "So long as they are working, which is the optimal solution, then no more cuts may be needed."

Another trader said rates needed to be lowered to keep the money flowing. "I think [the] Fed has to cut maybe even 50 [bps] to keep the new capital coming in and damming up companies that need the money," he said.

In the meantime, the markets wait.

E*Trade struggles on new funding

New York-based online financial house E*Trade announced it received $2.55 billion in funding, $2.4 billion immediately, from Chicago-based Citadel. Citadel specializes in struggling companies.

As part of the deal, Citadel will hold 18% ownership of E*Trade and a seat on the board. Citadel bought E*Trade's $3 billion asset-backed security portfolio for $800 million. The private equity shop also got $1.75 billion in 10-year notes with a 12.5% coupon and stock.

A trader said the deal looked "rather expensive." "It looks like Citadel stole their lunch, perhaps even picked their pocket," he said.

The trader wasn't the only person who felt that way, as E*Trade's 6.125% common equity units due Nov. 18, 2008 and the company's stock were whacked following an early surge after the announcement.

The E*Trade preferreds (Nasdaq: ETFCP) tumbled 44 cents, or 5.27%, to $7.91 Thursday.

E*Trade's common stock (Nasdaq: ETFC) left behind 46 cents, or 8.71%, for a $4.82 close.

MGI Pharma up on options talk

Bloomington, Minn.-based drug maker MGI Pharma surged Thursday after its board of directors authorized the company to seek strategic alternatives, often a euphemism for a search for a buyer.

MGI's 1.682% convertible cash-to-zero senior subordinated notes due March 2, 2024 closed Thursday at 84.299 versus a closing stock price of $35.10. The convertibles closed Wednesday at 78.178 versus a stock price of $29.55.

MGI stock (Nasdaq: MOGN) leaped $5.55, or 18.78%, in trading Thursday.

WCI down as home prices dip

Bonita Springs, Fla.-based homebuilder WCI Communities tumbled as a federal study showed house prices crumbled in the third quarter and the backlog of available new homes grew larger.

WCI's 4% convertible senior subordinated unsecured notes due Aug. 5, 2023 closed Thursday at 69.04 versus a closing stock price of $3.13. They closed Wednesday at 75.79 versus a stock price of $3.31.

WCI stock (NYSE: WCI) fell 18 cents, or 5.44%, on the day.

Suntech shines bright

Wuxi, China-based photovoltaic cell producer Suntech Power surged Thursday.

The firm's 0.25% convertible senior notes due Feb. 15, 2012 closed Thursday at 175.095 versus a closing stock price of $80.00. They closed Wednesday at 164.337 versus a stock price of $74.33.

The surge in convertibles mirrored the splurge in Suntech's stock (NYSE: STP), which was up $5.67, or 7.63%, on the day.

Countrywide continues rise

Calabasas, Calif.-based mortgage lender Countrywide had another up day Thursday.

Countrywide's Libor minus 350 basis point series A convertible senior debentures due April 15, 2037 closed Thursday at 79.6811 versus a closing stock price of $9.30. They finished Wednesday at 78.7391 versus a stock price of $8.72

Countrywide's Libor minus 225 bps series B convertible senior debentures due May 15, 2037 closed Thursday at 74.9565 versus a stock price of $9.30 after finishing Wednesday at 74.1608 versus a stock price of $8.72.

Countrywide stock (NYSE: CFC) picked up 58 cents, or 6.65%, in Thursday trading.

iStar Financial rises

New York-based commercial real estate financier iStar watched its Libor plus 50 bps convertible senior floating-rate notes due Oct. 1, 2012 close Thursday at 89.1189 versus a closing stock price of $28.21. The convertibles closed Wednesday at 87.7527 versus a stock price of $27.92.

iStar stock (NYSE: SFI) gained 29 cents, or 1.04%, on the day.

Excel Maritime has calm seas

Athens, Greece-based maritime shipping firm Excel Maritime's 1.875% convertible senior notes due Oct. 15, 2027 closed Thursday at 97.94 versus a closing stock price of $52.78. They closed Wednesday at 94.62 versus a stock price of $49.53.

Excel Maritime stock (NYSE: EXM) leaped $3.25, or 6.56%, on the day.

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