U.S. convertible issuance up 22 pct in 2nd quarter

NEW YORK (Reuters) - Sales of U.S. convertible securities rose 22 percent in the second quarter to the most in five years as financial companies bolstered their balance sheets, according to preliminary data from Thomson Reuters released on Friday.

U.S. companies sold about $36.2 billion of convertible securities in the second quarter, up from $29.7 billion a year earlier, according to data collected through June 26.

Lehman Brothers Holdings Inc LEH.N was the top bookrunner for convertible securities in the second quarter, with $7.8 billion in deals, or a 21.7 percent market share, taking the lead from Morgan Stanley, which managed $5.8 billion in the year-ago quarter, or a 19.5 percent market share.

The increase in convertible issuance came as financial companies raised cash after suffering massive write-downs in the wake of a subprime mortgage crisis, strategists said.

Top deals included $5.9 billion issued by American International Group Inc (AIG.N), $4 billion from Wachovia Corp WB.N and $2.6 billion from Fannie Mae (FNM.N). Lehman issued two large deals, $4 billion in April and $2 billion in June.

A type of hybrid debt that can be converted into shares, convertible securities allow companies to raise money without selling shares at depressed prices, said Alan Levin, managing director at Standard & Poor's.

"They feel their stock is unnecessarily depressed now because of the subprime problem and how it's affected many of the financial institutions," said Levin. "They get the capital today, and they're not really selling the equity until the price is higher."

For the first six months of the year, convertible issuance was 3 percent below the year-ago level, at $53 billion, versus $55 billion. But the average size of deals climbed to $713 million from $459 million in the first half of 2007 as banks and brokers issued more mega-deals.

Other large issues sold in the first half included $6.9 billion from Bank of America Corp (BAC.N) and $3.2 billion from Citigroup Inc (C.N), both in January.

(Reporting by Dena Aubin; editing by Jeffrey Benkoe)