Endeavour up on debut; Electronic Arts adds in line; Lincare paper active; Rudolph on tap

By Rebecca Melvin

New York, July 19 - Endeavour International Corp.'s newly priced 5.5% convertibles traded up on their debut in the secondary market on Tuesday amid continuing weakness in the underlying shares after the Houston-based oil and gas development company launched its convertible deal early Monday, market sources said.

"It outperformed the equity, by far," a New York-based trader said.

Also in primary market action, Rudolph Technologies Inc. launched a $50 million offering of five-year convertible senior notes early Tuesday that was expected to price after the close.

The very small Rudolph deal from a very small-cap company wasn't getting much attention in the convertible bond market ahead of pricing, sources said.

Electronic Arts Inc., which debuted last week, traded higher in line with the underlying shares of the Redwood City, Calif.-based video game maker.

Also in trade were the dual convertibles of Lincare Holdings Inc., after the Clearwater, Fla.-based home health care company released earnings that missed expectations on the bottom line.

Peabody Energy Corp. was up in line with the underlying shares after the St. Louis-based coal producer reported a 38% rise in second-quarter profit on the back of higher coal prices and increased sales in Australia and after raising its full-year earnings outlook.

Chicago-based Equity Residential, a real estate investment trust focused predominantly on multifamily properties, traded actively between 102.375 to 102.875 on the heels of the company's call of its approximately $483 million of 3.85% exchangeable senior notes due 2026.

Overall, the convertible bond market was mixed, with higher equities helping some names and rumors of convertible fund redemptions said to be occurring Tuesday, spurring some selling - although not getting hit hard, sources said.

"I think it is kind of all over the place and name specific," a New York-based trader said.

Equities turned around and rallied, boosted by some positive earnings reports and progress toward a U.S. deficit-reduction plan.

President Barack Obama praised a $3.7 trillion plan hammered out with bipartisan support.

"I think it's a very significant step," Obama said.

The broad market rally comes after stock indices fell on Monday to their lowest close for July.

In economic news, U.S. new home construction in June rose to the highest level in five months, according to the Commerce Department. New home starts surged 14.6%, much better than the 2.7% increase expected. Permits for new housing units also beat expectations, increasing 2.5% in June following an 8.2% jump in May. Private-sector analysts had expected a 2.3% drop in permits from May to June.

Endeavour gains on debut

Endeavour's newly priced 5.5% convertibles traded up to 103 bid, 103.25 offered out of the gate Tuesday, according to a syndicate source. A second source said the paper traded up to 103.5 ahead of the market open.

Toward the end of the session, the new Endeavour 5.5% convertibles were bid a little lower at 102 bid, 102.5 offered.

Shares of the Houston-based oil and gas development company settled down 44 cents, or 3%, at $13.80, and the decline followed on the heels of a 13% plunge on Monday after the deal was launched.

The equity got "hammered," a trader said. And the new convertibles were up to 103.5 before the stock opened.

"Those have done well," the trader said of the new 5.5% Endeavour convertibles.

The offering was upsized by $10 million to $120 million in size and it priced at the midpoint of coupon talk and beyond the rich end of premium talk.

Action in the new paper slowed as the session progressed. "I haven't seen them in a while," one trader said, after they were about 103 bid, 100.25 offered at the pre-market and open.

Endeavour's Rule 144A private placement was sold via bookrunners Citigroup Global Markets Inc. and Morgan Stanley & Co. Inc.

Most of the proceeds will be used for the company's pending acquisition of acreage and related midstream assets in the Marcellus shale play.

Any remaining proceeds will be used for general corporate purposes, including funding a portion of Endeavour's 2011 capital program.

There is standard takeover and dividend protection.

Electronic Arts up in line

Electronic Arts' sizable $550 million of 0.75% convertibles due 2016 traded up to 102.25 bid, 102.50 offered with the stock up 45 cents to 50 cents.

"It seems like there were a couple of buyers around," a New York-based trader said.

The improvement from Friday - when the new paper was marked at 101.375 bid, 101.625 offered versus a common stock price of $23.51 at the close - looked to be about in line on a dollar-neutral basis.

Shares of Electronic Arts settled Tuesday at $24.10, which was up 49 cents, or 2%.

J.P. Morgan Securities LLC and Morgan Stanley were the bookrunners of the Rule 144A offering.

Rudolph Technologies to price

Rudolph, a small $304 million market cap company, launched a $50 million offering of five-year convertible senior notes talked to yield 3.25% to 3.75% with an initial conversion premium of 32.5% to 37.5%.

The Rule 144A deal, which was expected to price late Tuesday, wasn't heard in the gray market, according to one sellsider, and he suspected that its small size would deter much involvement.

The deal has a $10 million greenshoe and was being sold via bookrunner Credit Suisse Securities (USA) LLC.

The company, based in Flanders, N.J., is a maker of process control inspection equipment and software for such applications as the semiconductor and solar sectors. It is also a takeover candidate.

The planned Rudolph convertibles are non-callable and have net share settlement and standard change-of-control protection.

A portion of the proceeds will be used to pay for a convertible note hedge transaction with remaining proceeds earmarked for general corporate purposes, including potential acquisitions and strategic transactions, growth initiatives and working capital.

Mentioned in this article

Electronic Arts Inc. Nasdaq: ERTS

Endeavour International Corp. NYSE: END

Equity Residential NYSE: EQR

Lincare Holdings Inc. Nasdaq: LNCL

Peabody Energy Corp. NYSE: BTU

Rudolph Technologies Inc. Nasdaq: RTEC

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.