Convertibles flat; Actavis, Anthem mandatories edge up; SunEdison plans $750 million deal

By Rebecca Melvin

New York, May 11 – U.S. convertibles were seen moving mostly in line, or flat, on a hedged basis in quiet trading on Monday.

During the session “there was no real change in valuation. There were no real news or events that were creating opportunities to trade bonds,” a New York-based trader said.

Earnings continued to cycle through for U.S. convertibles issuers quietly. But after the market close SunEdison Inc. launched an offering of $750 million of convertible senior notes in two tranches.

Actavis plc’s 5.5% convertible mandatory preferreds traded flat to slightly higher on a hedged basis after the Dublin-based specialty pharmaceutical company reported better-than-expected earnings.

Meanwhile Anthem Inc.’s 5.25% mandatories, which priced last week, were up about 0.2 point on a hedged basis, a trader said. The Indianapolis-based health benefits company priced an upsized $1,175,000,000 of the three-year units at the rich end of talked terms last Wednesday.

Elsewhere, FXCM Inc.’s convertibles traded steady on previous levels after the New York-based foreign exchange services company reported weak earnings on Friday. Shares ended down 19 cents, or 9%, at $1.96.

Citrix Systems Inc. and Twitter Inc. also traded in line.

“It was a boring day,” a trader said.

Equities remained somewhat volatile, trading little changed early in the day and moving lower in the afternoon, following a jump on Friday.

On Friday, the Labor Department reported U.S. payrolls rose 223,000 in April, which was in line with most expectations. March’s figure was revised lower to just 85,000 jobs, which was down from the previously reported 126,000, which was low to begin with. But the unemployment rate fell one tick to 5.4% from 5.5% in March.

SunEdison launches deal

SunEdison’s newest offering of convertibles is a Rule 144A deal of $750 million of convertible senior notes in two tranches.

The $375 million of eight-year notes were talked at a 2.625% to 3.125% coupon and 32.5% to 37.5% initial conversion premium.

The $375 million of 10-year notes were talked at a 3.375% to 3.875% coupon and a 32.5% to 37.5% premium.

Both tranches are non-callable with no puts.

Active bookrunners are Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC, Barclays and Goldman Sachs & Co.

Settlement is for cash or a cash-and-stock combination.

There is dividend protection via a conversion rate adjustment and takeover protection.

Proceeds are expected to be used to fund M&A to enhance size and value of a future emerging market vehicle, to create a warehouse facility to acquire and hold operating assets for future dropdowns, to fund the cost of the capped call transactions, to optimize materials business, to retire debt and for other general corporate purpose.

In connection with the deal, the company plans to enter into capped call transactions with initial purchasers of the bonds. The capped call will be used to establish initial hedge positions.

St. Peters, Mo.-based SunEdison makes solar technology and develops, finances, installs and operates distributed solar power plants. The company has other convertible bond issues.

Actavis trades flat to higher

Actavis’ 5.5% convertible mandatories traded between 104.5 and 105.25, with the common stock adding 3% to end at $301.74.

“Actavis was a little bit better to buy,” a New York-based trader said. “They were up on swap by about 10 cents.”

The specialty pharmaceutical company, which completed its acquisition of Allergan Inc. in March, reported a net loss related to acquisition costs. But the Dublin-based company, with operational headquarters in Parsippany, N.J., reported first-quarter earnings of $4.30 a share excluding items, which was better than the $3.92 that was forecast. Revenue rose to $4.23 billion compared to $4.1 billion.

Actavis priced $4.6 billion of the 5.5% series A mandatory convertible preferred stock at the end of February.

FXCM steady despite earnings

The FXCM 2.5% convertibles due 2018 traded last around 84, which was little changed from previous levels.

The bond was not actively traded in the early going, but some prints went up in the name later in the day, sources said.

FXCM reported an adjusted profit of $14.5 million, which was down from $24.6 million in the year-earlier quarter.

Revenue was $98.8 million, which was down compared to $111.3 million in the first quarter of 2014.

FXCM was bailed out by Leucadia National Corp. in January after it was swamped by client losses related to the Swiss National Bank’s action to remove its cap on the value of the Swiss franc.

Mentioned in this article:

Actavis plc NYSE: ACT

Anthem Inc. Nasdaq: ANTM

Citrix Systems Inc. Nasdaq: CTXS

FXCM Inc. Nasdaq: FXCM

SunEdison Inc. Nasdaq: SUNE

Twitter Inc. Nasdaq: TWTR

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