American Tower adds on debut; Group 1 up on tender; Electronic Arts in line; Cobalt on tap

By Rebecca Melvin

New York, May 7 - American Tower Corp.'s newly priced 5.25% convertible mandatory preferreds rose on their debut in the secondary market on Wednesday after the Boston-based manager and developer of communications and broadcast tower sites priced an upsized $510 million of the shares at the fixed terms talked during marketing.

American Tower's mandatories were seen at 103.5 at about 3 p.m. ET, according to a syndicate source. The underlying shares were up about 1%.

Group 1 Automotive Inc.'s 3% convertibles traded up about 4 points on Wednesday to about parity plus 13 points after the Houston-based automobile dealer announced a tender offer for the $155 million of 2020 convertible bonds.

Elsewhere, Electronic Arts Inc.'s 0.75% convertible due 2016 moved in line in active trade as shares of the Redwood City, Calif.-based video game publisher surged 20% on strong earnings.

The common shares of a few high-flier names including Yahoo! Inc. and SolarCity Corp. were down sharply, with Yahoo! shares closing down 6.6% and SolarCity shares closing down 9%, but sources queried didn't know how the convertibles of those companies performed on a hedged basis.

However, the convertibles of SunEdison Inc., another high flier, expanded about 0.5 point on a dollar-neutral basis against a drop of 7.7% in the underlying shares, a trader said, by way of comparison.

In the primary market, Cobalt International Energy Inc. launched an offering of $1 billion of 10- year convertible senior notes after the market close that were seen pricing after the market close on Thursday, according to a syndicate source.

Overall, the convertible market still remained fairly quiet despite heavier news flow on Wednesday, a trader said.

"Volumes are stagnant. There is not a lot to say about the market because the flows from both outright and hedge funds are light. It is tough to say what people are thinking," the trader said.

The trader said volumes have been very light for about a week. He thought the ongoing low interest-rate environment played a role in the lack of activity, but he said there are also macro concerns creating uncertainty that has curtailed market players' activity.

Equities were mixed. The tech-heavy Nasdaq stock market remained in negative territory, or down 13 points to 4,067.67 following a 1.4% slide on Tuesday. But the Dow Jones industrial average and S&P 500 stock index turned positive, with the Dow gaining 117.52 points, or 0.7%, to 16,518.54 and the S&P 500 stock index adding 10.49 points, or 0.6% to 1,878.21.

New American Tower up

American Tower's newly priced 5.25% convertible mandatory preferred shares were seen up at 103.5 late afternoon Wednesday, after rising to 102.75 bid, 103.125 offered in the early going.

American Tower shares added $1.15, or 1.3%, to $88.35 on the day.

American Tower priced an upsized $510 million of the series A mandatories at par with an initial conversion premium of 25%.

The shares have a liquidation preference of $100 each.

There is a $70 million over-allotment option. Originally the deal was talked at a $425 million base deal and a $63.75 million greenshoe.

Proceeds will be used to fund recent acquisitions, including Richland Properties LLC and other related entities initially funded by debt. Remaining proceeds will be used for general corporate purposes.

Goldman Sachs & Co., BofA Merrill Lynch, Barclays and J.P. Morgan Securities LLC were the joint bookrunning managers of the offering.

The preferreds will be listed on the New York Stock Exchange under the ticker symbol "AMTPA."

Group 1 adds on tender

Group 1 Automotive's 3% convertibles moved up in active trade on Wednesday. The paper was seen printing at 210.65 on an outright basis, according to Trace data.

On a hedged basis, the bonds were seen up about 4 points to about parity plus 13 points.

The Houston-based automotive dealer said it began a tender offer for the 3% convertibles due 2020 that will end on June 24.

The purchase price of each bond will be a cash amount equal the sum of the average volume-weighted average price multiplied by 26.4021, plus a cash kiss of $169.00. The purchase price is set to be between $1.621.12 and $2.545.19 per $1,000 notes.

Proceeds will be based on a 32-trading-day average VWAP parity between May 9 and June 24 plus 16.9 points.

"However, the company is using a lower conversion ratio of 26.4021 to calculate average parity, not the current 26.8778 conversion ratio," a New York-based trader commented.

He said the offer is technically worth about parity plus 13.5 points versus last night's $72.57 share price close.

The bonds were trading up about 4 points on the day, the trader said.

Cobalt to price

Cobalt launched an offering of $1 billion of 10- year convertible senior notes that will be priced late Thursday and were talked to yield 2.625% to 3.125% with an initial conversion premium of 25% to 30%, according to a syndicate source.

Goldman Sachs and RBC Capital Markets LLC are joint bookrunners of the registered, off-the-shelf deal.

There is a $150 million greenshoe.

The notes are non-callable for five years and then are provisionally callable if shares exceed $30.00 for a specified period. Cobalt shares closed at $18.45 on Wednesday. There are no puts.

Proceeds from the sale of the notes will be used to fund Cobalt's capital expenditures and for general corporate purposes.

Houston-based Cobalt is an independent oil exploration and development company.

Mentioned in this article:

American Tower Corp. NYSE: AMT

Cobalt International Energy Inc. NYSE: CIE

Electronic Arts Inc. NYSE: EA

Group 1 Automotive Inc. NYSE: GPI

SolarCity Corp. Nasdaq: SCTY

SunEdison Inc. Nasdaq: SUNE

Yahoo! Inc. Nasdaq: YHOO

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