New Liberty Media/Time Warner exchangeable jumps about a point; valuations holding in

By Rebecca Melvin

New York, Aug. 12 – Liberty Media Corp.’s new notes exchangeable for common shares of Time Warner Inc. traded up on Friday upon release for secondary dealings after an upsized $444.6 million of the 30-year paper priced at the midpoint of talked terms, according to market sources.

The Liberty Media/Time Warner 2.25% exchangeable was quoted at 101.25 bid, 101.5 offered when Time Warner’s common shares were up fractionally at about $80.60.

Pricing of the Rule 144A deal came at the midpoint of talk, which was for a 2% to 2.5% coupon and a 27.5% to 32.5% premium. Initially the deal was talked at $425 million in size.

Time Warner shares ticked up and down during the session but ultimately ended little changed at $80.44.

Not only this new deal, but all of the new deals that have priced in the past two weeks have improved, a New York-based trader said.

Dominion Resources Inc.’s 6.75% equity units, which debuted in the market on Wednesday, were quoted at 51 bid, 51.35 offered versus $76.03 for the price of the underlying common shares. Dominion priced $1.25 billion of the series A equity units due 2019.

Other than the Time Warner exchangeable, the convertibles market was pretty quiet on Friday as is typically the case on Fridays in August.

“Valuations are holding up well and the new issue market has held in very well,” a New York-based trader said.

“Overall, the market has done much better through earnings season than I would have thought,” the trader said.

Even though the market is “frothy,” or pretty highly priced given that stock markets have notched multiple record highs this month, portfolio managers have to be invested and earning returns in a market in which central banks are being so accommodative and interest rates are so low, the trader said.

They have a mandate to be invested, and so they have to pick among the merchandise as carefully as possible, the trader said.

“Certainly among new issuance, nothing came in at all. And for the market in general, things have held in or improved. This would be accurate for most, larger cap names,” the trader said regarding the convertibles market in the past week or so.

In the broader markets on Friday, equities were toggling the flat line for much of the session and Treasuries edged up after disappointing retail-sales data. The slip in the S&P 500 stock index and Dow Jones industrial average came after they hit record highs again on Thursday.

The S&P 500 shed 1.74 points, or 0.2%, to 2,184.05, the Dow Jones industrial average lost 37.05 points, or 0.2%, to 18,576.47; but the Nasdaq Composite stock index ended up 4.5 points, or 0.1%, to 5,232.89.

In economic data, U.S. Commerce Department reported that U.S. retail sales growth was flat in July. Meanwhile, the yield on the 10-year Treasury note fell to 1.51% from 1.575% on Thursday.

Liberty Media jumps

Liberty Media/Time Warner’s 2.25% exchangeable due 2046 was quoted at 101.25 bid, 101.5 offered when Time Warner’s common shares were up fractionally at about $80.60.

The exchangeable “was up a point right out of the gate but only traded actively for about an hour and a half and then it fell asleep,” a trader said, noting that Fridays in August are typically slow.

Time Warner shares ended up 13 cents, or 0.2%, at $80.55.

It has been nice to see new deals, but the next couple of weeks are going to be slow, the trader said.

This past week alone there was $2 billion in new issuance in five deals. Among new deals in the prior week DISH Network Corp. priced $3 billion of 3.375% convertible notes due 2026. There were also four other new deals last week for total new issuance for the first week of August of about $4.73 billion.

In the latest new deal, the Time Warner exchangeable is a 30-year debenture, which matures Sept. 30, 2046 and was sold via bookrunners Morgan Stanley & Co. LLC and Citigroup Global Markets Inc.

The debentures are non-callable until Oct. 5, 2021. Investors can put the bonds on Oct. 5, 2021. Once exchanged, Liberty has the option to deliver Time Warner stock, cash or a combination thereof.

Proceeds will be used to provide additional operating funds and for general corporate purposes, including to make acquisitions.

Liberty Media is an Englewood, Colo.-based media and communications company.

Mentioned in this article:

DISH Network Inc. Nasdaq: DISH

Dominion Resources Inc. NYSE: D

Liberty Media Corp. Nasdaq: LMCA

Time Warner Inc. NYSE: TWX

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