TTM Technology plans new deal; existing TTM bid higher; Spectrum on tap; USEC adds

By Rebecca Melvin

New York, Dec. 16 - TTM Technologies Inc.'s planned deal for $150 million of seven-year convertibles was seen at fair value to a little cheap on Monday after the Santa Ana, Calif.-based maker of printed circuit boards launched the registered note offering ahead of the market open.

Using a credit spread of 450 basis points over Libor and a 27% vol., the deal was worth about 100.7 at the midpoint of price talk, a Connecticut-based trader said.

TTM's existing 3.25% convertibles due 2015 were bid about a half a point higher during the session, but there no trades to speak of as investors wait to see what the company will be paying to buy back some of that paper with proceeds of the new deal.

Also in the primary market, Spectrum Pharmaceuticals Inc. launched a new offering for $100 million of five-year convertibles. The deal, which was seen pricing after the market close on Tuesday, was talked at a coupon of 2.25% to 2.75% with an initial conversion premium of 27.5% to 32.5%.

Back in established issues, USEC Inc.'s 3% convertibles due October 2014 traded higher into the low 30s from about 20 after news that the Bethesda, Md.-based supplier of nuclear fuel and services has reached an agreement with most noteholders that will allow it to file for Chapter 11 bankruptcy.

Under USEC's pre-packaged bankruptcy plan, the $530 million of convertible debt would be replaced by debt totaling $200 million. The new debt would have a maturity of five years, which would automatically extend an additional five years upon the occurrence of certain events.

The restructuring plan also contemplates that the existing equity will be replaced with new equity. The noteholders would receive 79% of the new equity as common stock. The plan calls for Toshiba and B&W to jointly obtain 16% of the new common stock, as well as $40 million in debt on the same terms as the noteholders, in exchange for their existing preferred equity investment.

USEC shares plunged $5.30, or 60%, to $3.51 on Monday.

New TTM fair to cheap

TTM planned to price $150 million of seven-year convertible senior notes after the market close on Monday. The registered offering was talked to yield 1.5% to 2% with an initial conversion premium of 22.5% to 27.5%.

The seven-year bullets have a $22.5 million greenshoe and were being sold by J.P. Morgan Securities LLC and RBS Securities Inc. as joint bookrunners, with Barclays acting as a co-manager.

The notes have contingent conversion under certain circumstances and net share settlement.

Proceeds are expected to be used to repay a portion of its existing 3.25% convertible senior notes due 2015 and also to pay the cost of a call spread, with remaining proceeds for general corporate purposes, including repaying debt, potential acquisitions, working capital and capital expenditures.

In connection with the offering, TTM expects to enter into convertible note hedge and warrant transactions, or a call spread, aimed at reducing potential dilution of the stock upon conversion of the notes.

A trader, who valued the new issue using a 450 bps credit spread and 27% vol., said that some market players were using a 30% vol. input, which made the deal worth 102.6 at the mids. But "we think that is too high," the trader said.

TTM's existing convertibles were initially seen at 101.375 bid, 101.75 offered in the early going and later were seen 102.375 bid. But there were no sellers in sight, a trader said, suggesting that investors would want to wait to see what the company will pay to buy back some of the paper with proceeds of the new deal.

The existing TTM trades mostly outright.

The securities were initially flat at 101.625 bid, which was "in line with where they have been the past couple of weeks," a New York-based trader said.

USEC adds on pre-pack

USEC's 3% convertibles due 2014 traded up to the lower 30s on Monday on the heels of news that the majority of noteholders have agreed to a plan for restructuring the ailing company's debt.

The bonds had dropped to 20 this fall amid speculation around a potential bankruptcy.

A trader said the bonds "spiked up 14 points" to 32 bid, 33.5 offered from prior levels around 17 bid, 18 offered.

Just after the market close, a second trader said, "There are still trades going through." He said the bonds were active.

"People think the plan is worth more than 20," he said.

As for whether there will be further movement in the bonds, he said it will depend on how people value the business going forward. There are still unknowns regarding parts of the plan, he said.

The company said in a news release that the terms of the plan will strengthen its balance sheet, enhance its ability to sponsor the American Centrifuge project and improve its long-term business opportunities. Under the terms of the agreement, the company will replace about $530 million of the convertibles due Oct. 1, 2014 with about $200 million in new debt and equity.

Mentioned in this article:

Spectrum Pharmaceuticals Inc. Nasdaq: SPPI

TTM Technologies Inc. Nasdaq: TTMI

USEC Inc. NYSE: USU

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