Vipshop slips outright in active trade; ModusLink quiet; Carriage eyed; Herbalife lower

By Rebecca Melvin

New York, March 13 - Vipshop Holdings Ltd.'s 1.5% convertibles continued to trade actively on Thursday, the day after its market debut, with the bonds slipping on an outright basis but remaining flat on a dollar-neutral, or hedged, basis, unchanged from Wednesday, a New York-based trader said.

The Vipshop bonds were seen at 102.25 bid, 103 offered late in the session, with the shares at $149.50. That was down from 104.8 in the early going when the bonds opened higher at $157.87.

ModusLink Global Solutions Inc.'s new 5.25% convertibles were not heard in trade after the Waltham, Mass.-based supply chain company priced $90 million of five-year senior notes at the cheap end of talked terms. ModusLink shares sank, however, ending the day down 86 cents, or 18%, at $4.03.

Meanwhile, the Carriage Services Inc. deal for $120 million of seven-year convertibles bonds, which was seen pricing after the market close Thursday, looked fair to slightly cheap at the midpoint of talked terms, sources said.

Using a credit spread of 600 basis points over Libor and a 34% vol., a Connecticut-based trader said the deal was worth 101.2 at the midpoint of talk, which is for a 3% coupon and a 30% initial conversion premium.

A second source said that he thought the deal was fair value using a 600 bps credit spread and 30% vol. But he said that the deal merited a higher vol. of 34%.

Carriage Services shares fell $1.64, or 9%, to $17.03 on Thursday.

Back in established issues, Herbalife Ltd.'s 2% convertibles due 2019 traded lower outright and contracted a little more on a dollar neutral, or hedged, basis as shares extended losses suffered on news that the Federal Trade Commission has opened a formal investigation into the Cayman Islands-based nutrition company.

After the market close Thursday, Herbalife said it postponed its annual shareholders' meeting to April 29 from April 24 to continue discussions with Carl Icahn about new board nominees.

Overall the convertibles market saw lighter volume on Thursday and pricing softened going into the afternoon along with sharply lower equities.

The S&P 500 stock index fell 21.86 points, or 1.4% to close at 1,846.34; the Dow Jones industrial average slumped 231.19 points, or 1.4%, to 16,108.89, and the Nasdaq stock market fell 62.91 points, or 1.5%, to 4,260.42.

Vipshop unchanged

Vipshop's 1.5% convertibles due 2019 were last seen at 102.25 bid, 103 offered with the underlying shares at $149.50. That was down from 104.8 early Thursday, according to Trace data, when shares were higher.

Shares ended down $6.01, or nearly 4%, to $149.18 on Thursday.

"We traded some; we had a small buyer," a New York-based trader said.

The trader called the move flat on a dollar-neutral basis, which was unchanged from Wednesday when the upsized $550 million of Vipshop bonds debuted and their price rose to 104, which was in line with shares that were higher by 8%. Vipshop is a Guangzhou, China-based online discount retailer.

The bond deal size was increased from a planned amount of $400 million, and the bonds priced with a 40% premium.

Goldman Sachs (Asia) LLC and Deutsche Bank Securities were the joint bookrunners for the SEC-registered sale.

New ModusLink quiet

ModusLink's 5.25% convertibles were not seen in trade on Thursday after the upsized $90 million deal priced at the cheap end of talk.

"We haven't seen them; it was a $90 million, over-the-wall deal," a trader said.

The Rule 144A deal was initially talked at $75 million in size. Pricing came at the cheap end of talk, which was for a 5% to 5.25% coupon and a 23% to 25% premium.

BofA Merrill Lynch was the bookrunner of the offering that has a $10 million greenshoe, which was downsized from $11.25 million.

ModusLink can force conversion after March 6, 2017 if the stock trades at or above 130% of the conversion price. There are no puts.

The bonds have takeover and dividend protection, and they will be stock settled unless the company receives shareholder approval for flexible settlement.

Proceeds are for general corporate purposes, which may include potential acquisitions and other strategic business opportunities. No material acquisitions are probable at this time.

Waltham, Mass.-based ModusLink is a supply chain and business process management services provider.

Herbalife slips on hedge

Herbalife's 2% convertibles were quoted 85.5 bid, 86.5 offered near the session close Thursday versus an underlying share price of $58.00.

That was off about 0.25 point on a dollar-neutral basis, assuming a delta around 70%, a New York-based trader said.

The bonds "have been all over the place," the trader said. "They came in a couple of points yesterday and before that they were up."

Shares fell $3.26, or 5%, to $57.31 on Thursday, after dropping 7% on Wednesday.

Herbalife said it "welcomes the [FTC] inquiry given the tremendous amount of misinformation in the marketplace" and that it believes it is in compliance with all applicable laws and regulations.

Herbalife priced $1.15 billion of the 5.5-year convertibles on Feb. 4.

Mentioned in this article:

Carriage Services Inc. NYSE: CSV

Herbalife Ltd. NYSE: HLF

ModusLink Global Solutions Inc. Nasdaq: MLNK

Vipshop Holdings Ltd. Nasdaq: VIPS

© 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.