Cinedigm stock drops on heels of planned deal; Tesla Motors unchanged; homebuilders quiet

By Rebecca Melvin

New York, April 23 – Cinedigm Corp. shares plunged 23% after the New York-based independent content distribution rights company launched an offering of $60 million of 20-year convertible senior notes early Thursday.

The planned Cinedigm deal was talked at a 4.5% to 5% coupon and 25% to 30% initial conversion premium and was expected to price after the market close.

Back in the secondary market, things were quiet, sources said. Tesla Motors Inc.’s three convertible bonds were narrowly mixed on the Trace tape, with a New York-based trader calling them unchanged on a dollar-neutral, or hedged, basis on the day. Tesla shares fluctuated during the session and ended fractionally lower.

Tesla’s 1.25% convertible due 2021 crossed the Trace tape at 92, which was up a point on an outright basis.

The Tesla 1.5% convertibles due 2018 were at 180.2, which was down 0.9 point outright, and the Tesla 0.25% convertibles due 2019 were at 92.7, which was down 0.4 point.

Tesla is expected to report earnings May 6.

Homebuilders were surprisingly quiet, a New York-based trader said. M/I Homes Inc. was not heard in trade after the Columbus, Ohio-based residential home builder reported results that beat estimates on both the top and bottom lines.

The M/I Homes 1.875% convertibles were indicated lower at 102.6, compared to a previous level of 105.92, according to a market source. M/I Homes shares ended down 53 cents, or 2.2%, at 23.21.

Sales of U.S. new homes fell more than expected in March, dropping 11.4% to an annualized pace of 481,000, a four-month low, the Commerce Department reported Thursday.

The median price of a new home decreased 1.7% from a year earlier to $277,400, according to the Commerce data.

On Wednesday, the National Association of Realtors said sales of previously owned U.S. homes jumped 6.1% in March to a 5.19 million annualized rate, which was the best since September 2013.

Peabody Energy Corp.’s 4.75% convertibles due 2066 traded between 30 and 33.5 on Thursday, which was close to the previous range, as shares of the St. Louis-based coal producer slid nearly 8% on a wider first-quarter loss that was worse than expected.

The company said that the poor results were due to lower pricing and a shift in U.S. production mix toward the Southern Powder River Basin.

Medidata Solutions Inc.’s shares surged 21%, however, after the New York-based clinical development software specialist reported earnings that beat estimates and record first-quarter revenue.

Medidata’s 1% convertibles were indicated higher at 121 from 111.5 previously, according to a market source.

In the broader markets, stocks fluctuated and then climbed in afternoon trading. The Nasdaq Composite index rose to a record close of 5,056.06, which was up 20.89 points, or 0.4%.

In addition, oil prices rose to their highest level of the year on expectations that oversupply of crude may be shrinking and amid Middle East geopolitical concerns.

Light, sweet crude for June delivery settled up $1.58, or 2.8%, to $57.74 a barrel on the New York Mercantile Exchange. Brent crude rose $2.12, or 3.4%, to $64.85 a barrel on the ICE Futures Europe exchange.

Cinedigm to price

Cinegigm, a New York-based manager of distribution rights of independent movie and television content, launched an offering of $60 million of 20-year convertible senior notes before the market open. The news torpedoed shares.

Initial response in the convertibles space seemed blasé. One trader noted that the paper was unlikely to see much action in the secondary market due to its small deal size, which translates into a liquidity issue.

A second trader noted that while the deal was small, it represented a huge percentage of its market capitalization, which stands at $75.8 million.

Cinedigm shares tumbled 29 cents, or 23%, to $0.97.

The Rule 144A deal was being sold via bookrunner Piper Jaffray & Co.

The notes are non-callable for three years and then provisionally callable for two years if shares exceed 130% of the conversion price for 20 out of 30 consecutive trading days. There are puts in years five, 10 and 15.

About $18.2 million of the proceeds will be used to repay borrowings under the company’s term loan, with remaining proceeds to repurchase common stock under a forward stock purchase agreement, and for working capital and general corporate purposes, including development of the company’s OTT channels and applications and possible acquisitions.

The deal is expected to settle on April 29.

Concurrently with the notes offering, Cinedigm is entering into an amendment to its credit agreement, which will extend the term of the revolving loans to March 31, 2018. It will also provide for the release of the equity interests in the company’s subsidiaries and change the interest rate to a base rate plus 3% or Libor plus 4%, at the company’s election.

In connection with the offering, the company plans to enter into a privately negotiated forward stock purchase transaction with financial counterparties, under which the company will purchase a specified number of shares of common stock for settlement on or about the fifth anniversary of the issuance of the notes.

Mentioned in this article:

Cinedigm Inc. Nasdaq: CIDM

Medidata Solutions Inc. Nasdaq: MDSO

M/I Homes Inc. NYSE: MHO

Peabody Energy Corp. NYSE: BTU

Tesla Motors Inc. Nasdaq: TSLA

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