All about converts

$250m (37.5m) REG sen unsec tonight from JPM/MER. Terms: 3yr bullet, 7.75%-8.25% up 17.5-22.5% prot. UOP=pay down cp ($200m). $2.6B title, liability & mortgage insurer. Quality inv port but 1Q rev down in all businesses (mortage/titla = 1Q op losses) ’08 inv w/downs in MGIC/PMI but port now looking more stable w/conservative FI focus. Property/liability & mortgage biz will see difficult ’09 (mortgage biz will need more cash) so we’ll dscnt sprd to L+1000. Again, we’ll dscnt vol for inability to capture d/side (no c/hedge). We’ll use 30% THeo=102.75/104.25/105.625 Theo is only part of this story. A small deal with obvious x/o interest. Some using tighter credit so w/see more value but beware of the model trap – BUY