Planned NRG Yield looks cheap; Ingenico prices €500 million; secondary market, energy weaker

By Rebecca Melvin

New York, June 23 – Convertibles players sized up a couple of planned new issues expected to price in the United States after the market close on Tuesday.

NRG Yield Inc.’s planned $250 million deal of five-year senior notes was looking cheap, and CorEnergy Infrastructure Trust Inc.’s deal was seen as offering a nice, chunky coupon but the $75 million size was deemed too small to be of interest to many market players.

Using a credit spread of 300 basis points over Libor and 25% vol., the NRG convertibles looked worth 102.80 at the midpoint of talk, a Connecticut-based trader said.

The NRG deal was talked at a 3% to 3.5% coupon and 22.5% to 27.5% premium.

CorEnergy was talked at a 5.75% to 6.25% coupon and 12.5% to 17.5% premium.

NRG shares fell $1.94, or 8%, to $22.64 on the heels of the launched new deal, and CorEnergy shares lost 61 cents, or 9%, to $6.07.

Internationally, France’s Ingenico Group, a convertible issuer in the past, launched and priced an offering of €500 million seven-year convertible bonds at the rich end of the 0% coupon talk and richer than talk for a 55% initial conversion premium.

The Regulation S deal was sold via joint bookrunners Goldman Sachs International, Societe Generale Corporate & Investment Banking, HSBC and Natixis, and significantly oversubscribed.

Back among established issues, the convertibles market was weak, with more sellers than buyers, market sources said.

Low equity vol. and higher rates were cited for at least part of the reason for the drag on convertibles.

“Nothing is going the right way,” a Connecticut-based trader said.

Energy names weak

Energy convertibles traded and were weaker ahead of the new deals even as oil prices improved, lifting many energy stocks.

In particular Energy XXI (Bermuda) Ltd.’s 3% convertibles dropped, last changing hands at 24.875, which was down from about 29 previously, and compared to shares of the Houston-based energy exploration and production company, which added 13 cents, or 4%, on the day to $3.21.

Also Alpha Natural Resources Inc.’s 4.875% convertibles traded fairly actively at 7.5 on Tuesday, which was down from 8.25 previously. Shares of the Abington, Va.-based coal producer slipped 2 cents, or 4.9%, to $0.39.

Alpha Natural’s 3.75% convertibles due Dec. 15, 2017 traded at 7.75, which was down from about 14.25, according to Trace data.

Cobalt International Energy Inc. was also weak as shares of the Houston-based oil and gas company gained 22 cents, or 2%, to $10.50.

Cobalt International’s 2.625% convertibles due 2019 were last at 75.75, which was down about a point, while Cobalt’s 3.125% convertibles due 2024 were last at 76.80, which was flattish on an absolute basis, according to Trace data.

Meanwhile, Whiting Petroleum Corp.’s 1.25% convertibles, of which $1 billion priced in March, were quoted at 113.75 bid, 114.75 offered near the market close, when the underlying shares of the Denver-based oil and gas exploration and production company were up $1.31, or 3.8%, at $35.67.

One market source thought the energy sector was pressured a little more than the rest of the convertibles market because the new deals were also energy-related.

Citrix gains

Elsewhere, Citrix Systems Inc.’s 0.5% convertibles due 2019 were up about 2 points on an outright basis in very active trading, a New York-based trader noted.

The Citrix convertibles were last at 107.5, according to Trace data, which was up from 105.5, with the underlying shares of the Fort Lauderdale, Fla.-based cloud computing company also up nearly 2%.

Last week Citrix fell sharply after news that Standard & Poor’s was removing its unsolicited rating on the company.

Volume overall picked up somewhat on Tuesday compared to Monday, but the convertibles market was still described as “subdued.”

The major stock indexes ended in positive territory by a hair after wavering during the session. The Dow Jones industrial average ended up 24.29 points, or 0.1%, at 18,144.07; the S&P 500 stock index edged up 1.35 points, or 0.06%, to 2,124.20 and the Nasdaq stock market added 6.12 points, or 0.1%, to 5,160.09

Mentioned in this article:

Alpha Natural Resources Inc. NYSE: ANR

Citrix Systems Inc. Nasdaq: CTXS

Cobalt International Energy Inc. NYSE: CIE

CorEnergy Infrastructure Trust Inc. Nasdaq: CORR

Energy XXI (Bermuda) Ltd. Nasdaq: EXXI

Ingenico Group Paris: ING

NRG Yield Inc. Nasdaq: NYLD

Whiting Petroleum Corp. NYSE: WLL

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