Stillwater Mining up despite lower shares; Penn Virginia slips; Alpha Natural tender flops

By Rebecca Melvin

New York, Oct. 12 - Stillwater Mining Co.'s newly priced 1.75% convertible senior notes rose in the secondary market Friday after the Montana-based precious metals miner priced an upsized $345 million of the 20-year paper at the rich end of coupon talk and midpoint of premium talk late Thursday.

The new Stillwater notes rose to 103 and traded actively at 102 before closing at 101 bid, 101.5 offered against a 7.3% slide in the shares.

The newly priced Penn Virginia Corp. 6% convertible preferred shares also added out of the chute but faded to below par in the secondary market after the Radnor, Pa.-based oil and gas driller priced an upsized $100 million of preferreds at the cheap end of talk late Thursday.

Most of the day's trading was taken up by the two new deals, in particular the Stillwater Mining new deal. Penn Virginia was also trading, but given that it is a preferred share, it's activity wasn't recorded by Trace data.

"More than half the day's total volume was in the new Stillwater convert," a syndicate source said.

Both new deals were upsized and brought by underwriters Credit Suisse Securities (USA) LLC and Wells Fargo Securities LLC. RBC Capital Markets was also on the Penn Virginia deal.

The Alpha Natural Resources Inc. 3.25% convertibles due 2015 were steady at about 93.5 after the Bristol, Va.-based coal producer announced that investors tendered for only $122.35 million, or 18.58%, of the aggregate principal amount of those notes by the early expiration Thursday.

"It was not a disaster for the company by any means. It was about a third of the tender, and now they can go and take out some of the other debt, like the 2.375% convertibles," an East Coast-based buysider said.

Many of the Alpha Natural 3.25% convertible holders didn't want to tender because bonds remaining outstanding have to consent to some language that undoes its standing in the capital structure.

Otherwise the day was described as slow. Despite an economic report posting a robust jump in the consumer sentiment to a five-year high, equities erased early gains and ended mixed to lower.

The Dow Jones industrial average ended the day up 2.46 points, to 13,328.85. But the Nasdaq stock market ended down 5.3 points to 3,044.11, and the S&P 500 stock index ended down 4.25 points at 1,428.58.

New Stillwater active, adds

Stillwater's newly priced 1.75% convertibles due 2032 ended the session at 101 bid, 101.5 offered versus the closing share price of $10.22. The paper had been higher earlier at 103, and then a significant amount of trading went off at 102 on their debut in the secondary market despite lower underlying shares.

Shares of the Billings, Mont.-based producer of palladium and platinum fell, trading down around 80 cents, or 7.3%, at $10.22 in heavy volume.

"It did fine," a buysider said of the paper, quoting it a 102.125 with the stock $10.42 in late afternoon trading.

Allocations were pretty thin and more than the average amount went to the hedged community, the buysider said.

"For some reason there was a shift there," he said regarding the higher percentage that went to hedged players.

This particular player was not holding the bonds on swap, but he said some were setting up with even a 100% delta and also 90% to 96%, or nearly a full hedge.

The high delta may be related to the fact that the bonds have an incremental share feature, under which holders receive extra shares on conversion if the stock reaches certain benchmarks.

"It can run it on a high delta: if it goes up the delta goes up with it. If the stock cracks, there's a bond floor there; call it 70-75," he said.

He suggested that the market may see more paper with this feature, which has resurrected from five or six years ago when many deals came with the so-called "hyper" structure.

Holders of the Stillwater deal will receive additional stock upon conversion based on an initial incremental share factor of 30.2481 if the common stock exceeds the base conversion price during specified conversion periods.

The incremental share factor was talked at 0.475 to 0.525 times the base conversion rate.

Stillwater priced an upsized $345 million of 20-year convertible senior notes after the market close Thursday at par to yield 1.75% with an initial conversion premium of 50%, according to a term sheet.

Initially the deal was going to be $300 million in size. The over-allotment option was upsized to $51.75 million from an initially talked $45 million.

The registered, off-the-shelf deal came at the rich end of coupon talk, which was 1.75% to 2.25%, and at the midpoint of 47.5% to 52.5% premium talk.

Credit Suisse Securities (USA) LLC and Wells Fargo Securities LLC were the joint bookrunners.

The notes are non-callable for seven years, with puts on Oct. 15 of 2019, 2024 and 2029.

The notes are convertible into cash, shares, or a combination, based on the company's choice.

Proceeds will be used to repay amounts that may come due under the company's outstanding 1.875% convertible debentures in March 2013, with any additional proceeds earmarked for general corporate purposes.

New Penn Virginia slips

Penn Virginia priced upsized convertible preferred and downsized common stock offerings.

Penn Virginia's newly priced 6% convertible preferred shares traded up above par before fading to 98.75 bid, 99.75 offered by the close, a syndicate source said.

Early in the day the paper was at 101.25 against weak shares. But the shares pared some of their early loss to end down 11 cents, or 2.2%, at $4.89 in heavy volume.

The underlying Penn Virginia shares fell by nearly 4% by midmorning but were down only 1.6% at noon.

"These are still really cheap," the syndicate source said of the new preferreds.

At issue the bonds were 100 bid, 100.5 offered.

Penn Virginia priced an upsized $100 million of convertible preferred shares at $100 per share after the market close Thursday to yield 6% and with an initial conversion premium of 20%, according to a term sheet.

The registered offering, which was originally going to be $50 million in size, priced at the cheap end of 5.5% to 6% yield talk and 20% to 25% premium talk.

The depositary shares represent a fractional ownership of interest in a share of convertible perpetual preferred stock, or preferred equity. There is an over-allotment option for up to $15 million additional preferreds, up from an originally talked $7.5 million.

The deal compares to Sanchez Energy Corp.'s 4.875% convertible perpetual preferreds, which priced an upsized $125 million of convertible preferreds Sept. 11. Both companies are oil and gas exploration and development companies. Sanchez was priced by bookrunner RBC Capital Markets LLC.

Penn Virginia also priced a downsized secondary offering of 8 million of common shares at $5.00 per share, or $40 million.

The stock offering was initially going to be 12 million in size. There is an over-allotment option for 1.2 million additional shares, which was downsized from 1.8 million.

Credit Suisse Securities (USA) LLC was the active bookrunner and stabilization agent for the preferred offering, with RBC Capital Markets and Wells Fargo Securities as passive bookrunners. Co-managers were Capital One Southcoast Inc. and Scotia Bank-Howard Weill Inc.

Proceeds of both offerings will be used to repay outstanding borrowings under its revolving credit facility and for general corporate purposes.

The perpetual preferreds are non-callable, with forced conversion after five years at the company's option if the stock is 130% above the conversion price.

The shares have physical conversion settlement and change-of-control and dividend protection.

Mentioned in this article:

Alpha Natural Resources Inc. NYSE: ANR

Penn Virginia Corp. NYSE: PVA

Stillwater Mining Co. NYSE: SWC

© 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.