Morning Commentary: Frontier, Anadarko mandatories on tap; ON Semiconductor steady

By Rebecca Melvin

New York, June 4 – Frontier Communications Corp.’s offering of $1.75 billion of convertible preferred stock was looking roughly fair value ahead of final terms expected to be fixed after the market close Thursday, a New York-based trader said.

The registered Frontier deal was talked to yield 11.125% to 11.625% with an initial conversion premium of 12.5% to 17.5%.

Frontier shares were a bit lower on Thursday after jumping Wednesday after the company launched the mandatory and concurrent stock offerings and after DA Davidson upgraded Frontier shares to “buy” from “neutral,” citing the new deals as having removed a debt overhang.

A convertibles trader commented on the Frontier mandatory, saying, “there is a lot of paper in that sector in an eroding legacy business. I think common swap might work, but think the valuation is fair.”

The Anadarko Petroleum Corp. $325 million offering of tangible equity units, exchangeable into shares of its subsidiary Western Gas Equity Partners LP, was less of a focus ahead of final terms expected to be fixed after the market close.

That deal is talked at a 7.5% to 8% coupon and a 20% to 25% premium.

ON Semiconductor Corp.’s 1% convertible bonds, which debuted in the secondary market on Wednesday, were steady or in line with the underlying shares after the paper expanded 2.5 points on Wednesday.

The new ON Semiconductor bond traded at 103.8, according to Trace data. That was off slightly in line with shares.

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