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Morning Commentary: ON Semiconductor deal looks fair value; Frontier launches $1.75 billion deal
By Rebecca Melvin
New York, June 2 – Market players were sizing up two new deals in the U.S. convertibles primary market early Tuesday, while a bumper crop of new deals materialized internationally.
ON Semiconductor Corp.’s planned $600 million of 5.5-year convertibles, launched after the market close on Monday for pricing Tuesday, were looking right about fair value at the talked terms, a New York-based trader said.
“They model almost exactly fair value, but I think the deal will do well given the lack of paper in the market,” the trader said.
Phoenix-based ON makes and sells semiconductors for electronic devices. Shares were down 1.6% in the early going on the heels of the launched convertible.
Also early Tuesday Frontier Communications Corp. launched an offering of $1.75 billion of convertible preferred stock in a registered deal talked to yield 11.125% to 11.625% with an initial conversion premium of 12.5% to 17.5%.
Frontier, a Stamford, Conn.-based wireline communication provider, is also pricing $750 million of common stock. The deals are earmarked to fund its previously announced acquisition of Verizon assets.
Frontier shares were up 2.3%.
Internationally there was a deal priced by Germany’s Salzgitter AG for €168 million of seven-year 0% convertible bonds with an initial conversion premium of 45%, and British Land Co. plc, a London-based real estate company, launched a deal for £350 million of five-year convertible bonds that were talked to yield 0% to 0.5% with an initial conversion premium of 20% to 27.5%.
In Asia, real estate developer China Merchants Land Ltd. plans to price $250 million of five-year convertible bonds on Tuesday that were talked at a 0% to 0.5% coupon and a 20% to 25% premium. Meanwhile, real estate company lida Group Holdings Co. Ltd. plans to price ¥30 billion of five-year convertibles at 100.5% of par that were talked at a 0% coupon and a 25% to 35% premium.
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