New BPZ Resources quiet; existing BPZ active on company repurchases; NextEra units on tap

By Rebecca Melvin

New York, Sept. 19 - The convertible bond market saw better bidders Thursday and trading volumes were generally stronger the day after the Federal Reserve's surprise move to stand pat on its $85 billion a month in asset purchases for the time being. Equities were mixed after a surge on Wednesday.

Qihoo 360 Technology Co.'s convertibles, which priced last month, traded early in the session at 113.5 bid, 113.875 offered versus an underlying share price of $84.94. That was stronger than earlier in the week when shares of the China web search engine dropped and the bonds traded at 111.25 to 112. At the close Thursday, on a higher stock price, the paper was indicated at 115.5 versus a share price of $90.00.

Clean Energy Fuels Corp.'s 5.25% convertibles, which priced last week, traded early Thursday at 103.125 versus an underlying share price of $13.32. At the end of the day, with shares down to $13.215, the bond was indicated at 102.875.

Elsewhere, DryShips Inc.'s convertibles traded higher by about a point to 98, with the stock of the Athens-based drybulk carrier and tanker company higher.

Elsewhere, GT Advanced Technologies Inc.'s convertibles jumped as shares surged following an upgrade to "buy" from "neutral" by UBS.

In the primary market, BPZ Resources Inc. priced $125 million of 8.5% convertibles at a 10% discount to par, but those notes were quiet in secondary market action.

"They're stuck. They were allocated to some sticky holders, who aren't ready to trade out of them," a syndicate source said.

BPZ's existing 6.5% convertibles due 2015 traded actively at 90, which is the level at which the bonds had been prior to the new issue and where the company bought them back on Thursday. Much of the volume in the 6.5% convertibles was related to the company's buyback. But there were also a few non-company related trades in size.

Pricing moved below 90 to about 88 and then to as high as 93 during the session.

After the market close, NextEra Energy Inc. launched an overnight offering of $500 million of three-year mandatory convertible equity units. The registered offering of units was seen pricing before the market open on Friday at a 2% discount to their $50 par value.

Trading picked up on Thursday, especially compared to early Wednesday when "people were just waiting for the Fed," a New York-based sellsider said.

The Fed's decision was contrary to the expectations of many that tapering of the stimulus purchasing was imminent. But it said that it will await further evidence of sustainability of economic growth before adjusting its pace.

The S&P 500 stock index slipped 3.18 points to 1,722.34 after jumping 1.2% to a record on Wednesday; the Dow Jones industrial average shed 40.39 points, or 0.3%, to 15,636.55 after gaining 147.21 points on Wednesday, but the Nasdaq stock market extended gains, adding 5.74 points to 3,789.38 after jumping 1% Wednesday.

New BPZ radio silent

BPZ's 8.5% convertibles due 2017 were not heard in trade, and a syndicate source said Thursday afternoon that the investors to whom the bonds had been allocated were not ready to trade them.

BPZ's existing 6.5% convertibles due 2015, of which $85 million out of about $171 million are being repurchased and retired by the company, traded a couple of points both north and south of 90.

"The only notes were at 90 and the company paid right around there," a syndicate source said. As to why the 6.5% convertibles moved above 90, the syndicate source said, "They've traded up a variety of different reasons; they may be perceived as the better credit and they are shorter dated."

On Thursday, BPZ shares fell 29 cents, or 12%, to $2.12 in heavy volume.

The Houston-based oil and gas exploration company priced an upsized $125 million of the new 8.5% four-year paper at a significant discount to par of 90.

The registered, off-the-shelf deal was initially seen at $110 million in size. Pricing came at the cheap end of coupon talk, which was 8% to 8.5%, and at the talked premium price point of 75%, which was set from a negotiated reference share price.

Raymond James & Associates Inc. was the bookrunner of the offering, for which there is an $18.8 million greenshoe.

The notes are non-callable and have dividend and takeover protection. They have contingent conversion if shares rise to 130% of the conversion price. They also have net share settlement.

Proceeds will be used to repurchase $85 million of BPZ's existing $170.9 million of 6.5% convertibles due 2015 and for general corporate purposes, including funding exploration and production or reducing or refinancing existing debt.

The company also plans to use cash on hand to repay a $36 million balance under its secured bank debt facility.

NextEra to price units

NextEra, a Juno Beach, Fla., power generation and transmission company, launched a registered, overnight deal of $500 million of mandatory convertible equity units that were talked at a $49.00 issue price, a 5.799% distribution rate and a premium of 20%.

Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC were the joint bookrunners.

The units consist of a contract to purchase NextEra Energy common stock and a 5% beneficial ownership interest in series G debentures due Sept. 1, 2018, issued in a $1,000 principal amount of NextEra Energy Capital Holdings Inc.

The purchase contract obligates holders to purchase from NextEra a certain number of shares no later than Sept. 1, 2016.

Mentioned in this article:

BPZ Resources Inc. NYSE: BPZ

Clean Energy Fuels Corp. Nasdaq: CLNE

DryShips Inc. Nasdaq: DRYS

GT Advanced Technologies Inc. Nasdaq: GTAT

NextEra Energy Inc. NYSE: NEE

Qihu 360 Technology Co. Nasdaq: QIHU

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