Convertibles mostly quiet; BroadSoft drops in line; Iridium, American Tower deals on tap

By Rebecca Melvin

New York, May 5 - U.S. convertibles traded quietly on Monday as market players cued up some positions ahead of earnings expected this week and otherwise waited for new deals.

BroadSoft Inc.'s convertibles dropped on an outright basis and were flat, or line, on a dollar-neutral basis after the Gaithersburg, Md.-based telecom software maker reported first-quarter results that missed estimates and guided second-quarter earnings below consensus estimates. But the company reaffirmed full-year 2014 results. BroadSoft shares skidded 19%.

Fluidigm Corp.'s 2.75% convertibles due 2034, which priced in February, traded ahead of its earnings release expected after the market close on Monday, and they were seen in line to better. Since the middle of last week, the bonds have expended 0.25 point to 0.5 point, a New York-based trader said.

In the primary arena, Iridium Communications Inc. launched a $125 million offering of cumulative perpetual convertible preferreds, which was expected to price Thursday in tandem with an offering of common stock.

The Iridium deal, which launched ahead of the market open, wasn't getting too much attention among market players, and Iridium's existing 7% cumulative perpetual convertible preferreds, or which $100 million priced in October 2012, were not seen in trade, a New York-based trader said.

Iridium shares ended down 39 cents, or 5%, to $7.24.

Also in the primary, American Tower Corp. launched after the market close $425 million of series A mandatory convertible preferred stock. The deal was seen pricing Tuesday, a syndicate source said, but dividend and premium talk weren't available.

Overall, "it was kind of boring, kind of quiet," a trader said of Monday's session. He said that market players are "waiting for deals."

Equities reversed early losses to end slightly higher on Monday. The Dow Jones industrial average added just 17 points, or 0.1%, to 1,6530.55; the S&P 500 stock index ended up 3.52 points, or 0.2%, at 1,884.66 and the Nasdaq stock market added 14.16 points, or 0.3%, to 4,138.06.

Stock trading was also light as investors hold off on taking big positions until there is greater clarity on where the market heads from here.

On Friday, convertibles ended little changed as equities slipped after April jobs data showed more jobs than forecast were added last month.

Non-farm payrolls added 288,000 jobs in April, which was much better than expected, and the unemployment rate fell to 6.3%., the Labor Department said.

BroadSoft drops in line

BroadSoft's 1.5% convertibles due 2018 traded late in the day at 96.75 bid, 96.875 offered with the underlying shares down at about $20.15.

BroadSoft shares slid $5.00, or 20%, to $20.00 in the early going.

They ended down 19%, and on a dollar-neutral basis, the BroadSoft convertibles were flat to up 0.25 point, if one was moving them on a delta of 50%, according to a New York-based trader.

"It depends on your hedge, but they may have nuked straight down if you were moving them on a 50," the trader said.

The trader was optimistic that the stark move lower could precipitate a bounce in the upcoming session.

"If they think they should expand, they might pull the trigger then," the trader said.

BroadSoft reported a first-quarter net loss of $7.5 million, or 26 cents per share, compared to a net loss of $2.3 million, or 8 cents per share, from the year-earlier quarter.

Revenue increased 11% to $43.9 million, compared to $36.9 million from the same period last year.

Results that missed estimates and current earnings were guided lower than consensus estimates. But the company reaffirmed full-year results, which was in line with expectations.

Fluidigm edges up

Fluidigm's 2.75% convertibles due 2034 traded early in the session at 108.25 with the underlying shares at $37.95.

That was moving up in line with the underlying shares, which ended the session up $1.10, or 2.9%, at $39.05 on Monday.

"We traded them at 62% today," a New York-based trader said of the convertible's delta.

Shares of the genomics and DNA research company tacked on another 1.7% in after-hours trade when it released earnings.

"We had an outright buyer on Friday and today, and the bonds are up 0.25 point to 0.5 point from the middle of last week," the trader said.

Fluidigm reported a net loss of $15.4 million for the first quarter, compared to a net loss of $3.6 million in the year-earlier period. On an adjusted basis, earnings for the quarter swung to a positive $75,000 for the quarter, from a $3.5 million loss in the year-earlier period.

Organic revenue was $22.9 million, an increase of 58% over the same quarter of 2013.

Looking ahead, Fluidigm is projecting total revenue for 2014 of between $111 million to $116 million.

Iridium to price

Iridium, a McLean, Va.-based mobile satellite service company, plans to price $125 million of cumulative perpetual convertible preferreds in tandem with a $45 million offering of common stock, with pricing expected officially Thursday, a syndicate source said.

The new series B preferred have a $250 per share liquidation preference and were seen pricing with a 6.25% to 6.75% dividend and 20% to 25% premium.

Deutsche Bank Securities Inc. and Raymond James & Associates Inc. are joint bookrunning managers of the registered, off-the-shelf convertible preferred offering. Canaccord Genuity and Societe Generale are acting as co-managers.

The preferreds are not convertible for five years and then provisionally callable if shares exceed 150% of the conversion price.

Proceeds will be used for general corporate purposes, which may include capital expenditures, including development and deployment of the Iridium NEXT system, working capital and general and administrative expenses.

The preferred shares will be listed on the Nasdaq Global Select Market under the symbol "IRDM.B."

American Tower on tap

Boston-based communications tower site developer American Tower will price $425 million of series A mandatory convertible preferred stock on Tuesday.

The registered shares have a liquidation preference of $100 each. There is a $63.75 million over-allotment option.

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

On May 15, 2017, the preferred shares will automatically convert into common shares based on the average volume weighted average price over 20 consecutive trading days prior to the conversion date.

The new mandatories are expected to be listed on the New York Stock Exchange under the ticker symbol "AMTPA."

Mentioned in this article:

American Tower Corp. NYSE: AMT

BroadSoft Inc. Nasdaq: BSFT

Fluidigm Corp. Nasdaq: FLDM

Iridium Communications Inc. Nasdaq: IRDM

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