JinkoSolar's planned $100 million convertibles looks cheap; SunEdison adds; NuVasive jumps

By Rebecca Melvin

New York, Jan. 15 - JinkoSolar Holding Co. Ltd.'s planned $100 million of five-year convertible notes looked cheap for investors from a valuation perspective, but stock borrow in the name was said to be limited, market sources said.

The China-based solar products manufacturer was planning to price the bonds together with an offering of 2.75 million American Depositary Shares. Timing on the deal was unknown.

JinkoSolar's existing 4% convertibles due 2016, which are fairly illiquid, were not heard in trade.

St. Peters, Mo.-based silicon wafer maker SunEdison Inc. saw its two convertible tranches in trade at levels that were improved on a dollar-neutral, or hedged, basis, a New York-based trader said.

Elsewhere, NuVasive Inc.'s 2.75% convertibles moved higher outright in very active trade after the San Diego-based medical device maker said its revenue outlook for the just-completed year has been raised on better-than-expected growth of its broader spine market.

The NuVasive bonds were about 4.5 points higher on an outright basis, but it wasn't immediately known how the issue performed on a dollar-neutral, or hedged, basis. NuVasive shares jumped 8.5%.

Overall, the convertible bond market continued to tread water, and market sources said they expected it to remain rather lackluster until earnings season is well underway and/or until there is new-deal flow.

As for trading on Wednesday, one New York-based trader said, "There was some sporadic stuff."

A second New York-based trader said the market is "dismal," and market participants seem to be waiting for new issuance.

Equities extended gains with the S&P 500 stock index pushing up into record territory. Positive data and Bank of America Corp.'s strong earnings cheered investors.

In economic data, the Fed's Beige Book showed that the economy is expanding at a moderate pace with eight of 12 districts reporting hiring growth. In addition, producer prices rose 0.4% in December, the Labor Department said. The core producer prices index, which excludes volatile food and energy prices, rose 0.3%, which was better than expected.

The S&P 500 was up 9.5 points, or 0.5%, to 1,848.38; the Dow Jones industrial average added 108.08 points, or 0.7%, to 16,481.94; and the Nasdaq stock market pushed up 31.87 points, or 0.8%, to 4,214.88.

JinkoSolar deal on tap

The planned JinkoSolar deal was looking cheap, but market sources noted its small size and said it didn't appear to be overly appealing to investors.

The new JinkoSolar convertible was talked at a 4% coupon and a 30% initial conversion premium at the midpoint of terms. One trader said those terms made the deal 6% cheap, using a credit spread of 1,000 basis points over Libor and a 40% vol.

A second source said he heard that stock borrow was difficult in the name, therefore he didn't see the deal as cheap as 6 points. Using a 1,000 bps credit spread and 45% vol. with reduced borrow made them 4.6% cheap, he said.

Using a 1,000 bps credit spread, 40% vol. and reduced borrow made them 2% cheap, he said.

The existing JinkoSolar 4% convertible was not seen in trade, but one source had a level on it of 117.75 with the underlying shares at $36.35, which was Tuesday's market close.

"It's been about two years since I traded this bond," one trader said.

The new Rule 144A JinkoSolar note has a $15 million greenshoe and was being sold via Credit Suisse Securities (USA) LLC as the bookrunner. The notes are non-callable for three years, with a put at year three.

Timing on the deals wasn't known.

SunEdison tranches better

SunEdison's 2% convertibles due 2018, or the A tranche, were in trade on Wednesday and quoted at the end of the session at 121 bid, 121.5 offered versus $14.55, the shares' closing level.

SunEdison's 2.75% convertibles due 2020, or the B tranche, were quoted at 123 at the close versus the closing share price of $14.55.

"There was a buyer in the Bs," a New York-based trader said.

He said that the B tranche advanced 0.5 point on a hedged basis, while the A tranche moved up 0.25 point.

SunEdison shares ended the day up 14 cents, or nearly 1%, at $14.55.

NuVasive jumps with shares

NuVasive's 2.75% convertibles due 2017 were seen last at 116.4 with the underlying shares at $36.66. That was up 4.5 points on an outright basis from about 112.

NuVasive shares jumped $2.88, or 8.5%, to $36.66.

There were outright prints in the name as well as hedged trades, a trader said.

Investors have been wary of this name given a government investigation into potentially fraudulent Medicare and Medicaid claims by the company. Before that they were leery of patent litigation surrounding the company.

Early Wednesday, NuVasive said it expects to post revenue of $683 million, which was up from prior guidance of $670 million.

The company also forecast 2014 revenue of $725 million, which was in line with its previous guidance of mid-single digit growth.

"Revenue guidance for 2014 contemplates continued market share gains within a stabilizing domestic spine market. NuVasive is also targeting full year 2014 non-GAAP operating margin expansion of approximately 100 basis points compared to full year 2013," the company said in its release.

Mentioned in this article:

JinkoSolar Holding Co. Ltd. NYSE: JKS

NuVasive Inc. Nasdaq: NUVA

SunEdison Inc. Nasdaq: SUNE

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