NXP Semiconductors expands after merger news; American Realty improves; Gogo to price

By Rebecca Melvin

New York, March 2 – Convertibles traded quietly on the first trading day of March on Monday as equities pushed higher again, sending the Nasdaq Composite above the 5,000 mark for the first time in 15 years.

The day’s gains came on top of strong moves in stock markets for February. The S&P 500 stock index was up 4% last month. Convertibles were up about 1% as of Feb. 26, according to the Hedge Fund Research convertible arbitrage index.

On Monday in convertibles, NXP Semiconductors NV’s 1% notes jumped on an outright basis and expanded on a dollar-neutral basis after news that the Dutch semiconductor components company has agreed to buy Freescale Semiconductor Ltd. for about $16.7 billion, including debt, according to a statement.

The deal is expected to be completed in the second half of this year.

American Realty Capital Properties Inc.’s convertibles also rose on good news. The real estate investment trust filed restated results that showed wider losses for 2013 and the second quarter of 2014, but they didn’t reveal anything more than market players were expecting.

Goodrich Petroleum Corp.’s 5% convertibles edged higher again despite sharply lower shares after the Houston-based oil and gas exploration and production company priced 12 million shares of common stock at $4.15 per share.

But Rovi Corp.’s new 0.5% convertibles came in a little on a hedged basis as shares weakened. The new notes came in about 0.375 point on swap following an expansion of 0.5 point to a point on its debut on Friday, a New York-based trader said.

The primary market was quiet during the session, but after the market close, Gogo Inc. launched a deal for $300 million of five-year convertible senior notes that were being sold via bookrunners J.P. Morgan Securities LLC and BofA Merrill Lynch.

“It was very quiet today,” a trader said, adding that he hadn’t heard yet how convertibles players performed for February as it didn’t seem that most had closed out their books for the month yet.

NXP jumps outright

NXP Semiconductors’ 1% convertibles due 2019 traded up to about 118 from about 109 on Friday, market sources said. The bonds expanded about 0.5 point on a dollar-neutral, or hedged, basis, a New York-based trader said.

NXP shares surged $14.67, or 17%, to $99.56.

NXP and Freescale announced their $40 billion merger on Sunday. The combined companies will be a leader in automotive semiconductors and general purpose microcontroller products. NXP is based in the Netherlands, and Freescale is based in Texas.

Under the terms of the agreement, Freescale shareholders will receive $6.25 in cash and 0.3521 of an NXP ordinary share for each Freescale common share held at the transaction’s close.

The purchase prices implies a total equity value for Freescale of about $11.8 billion and a total value including debt of about $16.7 billion.

NXP expects to fund the transaction with $1 billion of cash from its balance sheet, $1 billion of new debt and about 115 million NXP ordinary shares.

American Realty strengthens

American Realty Capital’s 3.75% convertibles due 2020 traded up about 3.25 points to 97.75.

American Realty Capital’s 3% convertibles due 2018 added 1.375 points to 97, according to Trace data.

In the early going American Realty Capital shares were up about 4% to above $10.00. But they closed up only 9 cents, or 0.9%, at $9.90.

“ARCP had good news,” a trader said.

A second trader said he saw the bonds at “96, 97, 98.”

The restatements were due after the company disclosed last fall accounting irregularities that it discovered and didn’t correct immediately. The restatements didn’t appear to reveal any additional issues.

Goodrich remains up

Goodrich Petroleum’s 5% convertibles due 2032 extended gains notched on Friday, trading up well above 50. On Monday, one trader said that the bonds had added another point.

But shares were sharply lower after the company priced an offering of common stock.

On Friday, the bonds had risen about 5 points after the company announced additional financing via second-lien notes and an amendment to its existing credit facility.

But Rovi’s 0.5% bonds due 2020 weakened in tandem with sharply lower shares. The bonds, which debuted in the market on Friday, were seen lower by 0.375 point on Monday. But since issue they were still on the positive side, up about 0.125 point, a New York-based trader said.

Rovi shares ended down $1.99, or 8%, at $22.89.

On Friday the Rovi 0.5% convertibles traded last at around 105 with shares up $1.94, or 8.5%, at $24.88.

The Santa Clara, Calif.-based software and internet media company priced $300 million of the five-year senior notes at the midpoint of coupon talk and toward the rich end of premium talk, market sources said.

Gogo to price $300 million

Itasca, Ill.-based Gogo plans to price $300 million of five-year convertible senior notes after the market close on Tuesday.

The Rule 144A deal was talked to yield 3.25% to 3.75% with an initial conversion premium of 22.5% to 27.5%.

The Rule 144A offering has a $45 million greenshoe and was being sold via bookrunners J.P. Morgan Securities LLC and BofA Merrill Lynch.

The notes are non-callable. They have contingent conversion prior to Dec. 1, 2019 under certain circumstances. They will be settled in shares of common stock, cash or a combination.

In connection with the offering of notes, Gogo plans to enter into one or more privately negotiated forward stock purchase transactions with initial purchasers of the notes. The forward stock purchase transactions are expected to facilitate privately negotiated derivative transactions between the forward counterparties and holders of the notes, including swaps.

A portion of net proceeds will be used to fund the cost of repurchasing stock under the forward stock purchase transactions. Remaining proceeds will be used for working capital and other general corporate purposes, including costs associated with developing next generation technology and possibly the acquisition of additional spectrum.

Mentioned in this article:

American Realty Capital Properties Inc. Nasdaq: ARCP

Gogo Inc. Nasdaq: GOGO

Goodrich Petroleum Corp. NYSE: GDP

NXP Semiconductors NV Nasdaq: NXPI

Rovi Corp. Nasdaq: ROVI

© 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.