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Morning Commentary: DISH to bring $2 billion of convertibles; Inotek prices; Cobalt paper declines
By Stephanie N. Rotondo
Seattle, Aug. 2 – DISH Network Corp. added a deal to the convertible new issue calendar on Tuesday, a $2 billion offering of 10-year notes.
Initial price talk is for a yield of 3.125% to 3.625%, a market source reported. The initial conversion premium is expected to be 30% to 35%.
“There’s no gray market yet in DISH, which is surprising,” a trader said. “I’m assuming there is a small premium bid, but I haven’t seen that to confirm it.”
There is dividend and cash takeover protection.
Upon conversion, DISH will settle its obligations in cash, shares of class A common stock or a combination thereof.
Proceeds will be used for strategic transactions, which may include wireless and spectrum-related strategic transactions, and for other general corporate purposes.
That announcement came on the heels of Inotek Pharmaceuticals Corp. pricing its $50 million offering of 5.75% convertible senior notes due 2021.
The conversion rate is 124.7505 common shares per each $1,000 of notes, with an initial conversion price of $8.02 per share. That equates to an initial conversion premium of 16.8%.
Price talk was for a 5.5% to 6% yield and a 15% to 20% initial conversion premium.
Away from new issues, a trader said Cobalt International Energy Inc.’s 3.125% convertible notes due 2024 were trading down to 34 from 40 previously.
“They took every bit of bad news they had and threw them out this morning with earnings,” he said.
In addition to posting a wider loss for the quarter, Cobalt also noted that a sale of its Angola blocks had hit a snag.
“Obviously it wasn’t the best of news,” the trader said.
The equity (NYSE: CIE) was trading off 36 cents, or 26.1%, at $1.00 in early trading.
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