Upsized Akamai trades slightly over par; Tesla 'has improved'; Frontline little changed

By Rebecca Melvin

New York, Feb. 14 - Akamai Technologies Inc.'s newly priced 0% convertibles due 2019 traded slightly higher out of the chute on Friday and then slipped with lower shares after the Cambridge, Mass.-based content delivery and cloud infrastructure company priced an upsized $600 million of the five-year notes at the tight end and beyond the tight end of talked terms late Thursday.

The new Akamai 0% convertibles were seen at 100.625 versus Thursday's closing share price of $59.71, according to a syndicate source early Friday. The new paper also traded at 100.875 and at 100.25, market sources said.

The U.S. convertible primary market almost broke $1 billion in new paper priced in the past week, tallying $980 million in base deals in four offerings. Akamai brought the lion's share of volume as the other three deals were much smaller in size.

Back in established issues, trading was subdued on Friday, sources said, following a winter storm that slammed the U.S. East Coast, leaving some areas of metro New York blanketed with as much as 20 inches of snow and ahead of the long holiday weekend.

U.S. stock and bond markets will be closed on Monday for the Presidents Day holiday.

Tesla Motors Inc.'s convertibles slipped a little in trade Friday but remained improved following gains in the last few weeks, a New York-based trader said. Shares of the electric car maker also slipped after clocking in at nearly $200.00 per share on Thursday, which was a record high. On Friday, shares came off slightly amid headlines about a second car fire involving a Model S sedan.

Tesla said the cause of the fire has not yet been determined, according to reports.

Frontline Ltd.'s convertibles traded at 89, which was steady to the offer side of previous levels, while shares of the Bermuda-based oil tanker shipping company jumped 7%. A trader said he didn't know what was causing the shares to move higher.

The Medicines Co.'s 1.375% convertibles recovered some ground following a 10-point drop on an outright basis Thursday. The bonds were last seen at 125.7, which was up about 4 points from lows touched Thursday after news that a regulatory panel ruled against approval of the company's Cangrelor blood clot prevention drug.

In the broader markets, shares extended gains following positive consumer confidence data that was better than expected. The Thomson Reuters/University of Michigan overall index of consumer sentiment stood at 81.2 in February, which was unchanged from the last reading in January.

Overall market tone remains "cautiously optimistic," a market source said Friday about the financial markets in general.

New Federal Reserve chairman Janet Yellen helped bolster stock markets at the beginning of the week when she testified to Congress that Fed policy going forward would adhere to that of policy set under past chairman Ben Bernanke.

She told the House Financial Services Committee Tuesday that the Fed would continue to take measured steps toward reduction of the current bond-buying program if the economy keeps improving, and she believes it will keep improving. But weak data coming later in the week resurrected speculation that the Fed might curtail tapering in an effort to keep wind in the sails of the U.S. economy.

On Friday, the S&P 500 stock index gained 8.8 points, or 0.5%, to 1,838.63, the Dow Jones industrial average gained 126.8 points, or 0.8%, to 16,154.39 and the Nasdaq stock market added 3.35 point to 4,244.03, extending its winning streak for a ninth straight day.

Akamai trades near par

The new Akamai 0% convertibles were seen at 100.625 versus Thursday's closing share price of $59.71, according to a syndicate source. The new paper also traded at 100.875 and at 100.25, market sources said.

Shares slipped in the early going but turned around quickly and closed up 32 cents, or 0.5%, to $60.03.

This Akamai deal priced at a very tight 0% coupon and 50% initial conversion premium. Its credit spread is very tight, given that the huge company with an $11 billion market capitalization has no other debt than this new issue of convertibles.

The deal was upsized to $600 million from $500 million and was allocated to investors on a 59% to 41% split between outright and hedged investors.

Pricing came at the tight end of coupon talk of 0% to 0.5% and beyond the tight end of premium talk, which was 42.5% to 47.5%.

The Rule 144A deal has a $90 million greenshoe, which was upsized from $75 million, and was sold by Morgan Stanley & Co. LLC as the bookrunner, with J.P. Morgan Securities LLC and BofA Merrill Lynch acting as co-managers.

Tesla has expanded

Tesla's 1.5% convertible senior notes due 2018 were last seen at 171.48 with the underlying shares at $198.23. The shares were off $1.40, or 0.7%, after a surge on Thursday.

On Thursday the bonds were the equivalent of 172.25 bid, 172.5 offered versus a share price of $200.00.

"The Teslas have improved over the past few weeks, with the [stock] borrow freeing up and dealers having limited inventory," a New York-based trader said.

He said there was also outright interest in the paper.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Frontline Ltd. NYSE: FRO

Medicines Co. Nasdaq: MDCO

Tesla Motors Inc. Nasdaq: TSLA

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