New SunEdisons mixed in active trade; older SunEdisons up in line; Cowen launches deal

By Rebecca Melvin

New York, May 13 – SunEdison Inc.’s new $750 million of convertibles in two tranches were mixed in active trade on Wednesday after the St. Peters, Mo.-based solar technology company priced the senior notes at the rich end and beyond the rich end of talked terms, market sources said.

SunEdison’s $375 million tranche of longer-dated, 10-year notes were seen a little cheaper than the eight-year tranche, and they traded a little better, a New York-based trader said.

SunEdison’s older bonds were also active, moving up mostly in line with the underlying shares, which gained 3% in afternoon trade. The SunEdison 0.25% convertibles were quoted at late morning at 118.125 bid, 118.625 offered. Later they were seen at 120.125.

Also in primary action, Cowen Group Inc. launched an offering of $105 million of cumulative perpetual convertible preferred shares that was seen pricing after the market close Wednesday. The $1,000-par preferreds were talked at a 5.375% to 5.875% dividend and a 15% to 20% premium.

Cowen’s existing 3% convertibles due 2019 were not heard in trade but were last seen at about 122, according to Trace data. Cowen shares fell 5% after the new preferred deal was launched.

The convertibles of bankrupt Nortel Networks Corp. were also seen in trade after a court decision that the $7.3 billion of former Nortel assets will be divided on a pro rata basis between Nortel’s international units, with the proportional distribution seen returning to all creditors about 71% of their claims.

Nortel Network’s 2.125% convertible notes that were to have matured in April 2014 traded actively on Wednesday and crossed the tape late in the session at 84.188. Those bonds were previously 98, according to a market source. Similar pricing was seen in Nortel’s 1.75% convertible notes that came due in 2012.

Otherwise convertibles were mostly quiet. SunEdison was definitely the name of the day, a New York-based trader said.

But pricing overall was steady, if not slightly better, amid some better buyers, one New York-based trader said.

“I would say there have been better buyers for the last two trading sessions. I’m surprised because of some of the interest rate vol. we’ve seen,” the trader said.

Still, he noted that market activity was “lumpy,” and one had to “pick your spots.”

New SunEdison paper mixed

The new SunEdison 2.625%, eight-year convertibles were quoted a little lower at 99.625 bid, 100.125 offered versus underlying share that were up 0.77% at late morning.

The longer-dated SunEdison 3.375% convertibles due 2025 were higher, however, quoted at 101.2 bid, 101.7 offered.

SunEdison shares were up fractionally early in the session and climbed higher into the close, ending up 88 cents, or 3.2%, at $28.49.

Using a bond delta of about 54%, the 2025 bonds were about a point better on a hedged basis, a New York-based syndicate source said, while the 2023 bonds cheapened by about 0.625 point to 0.75 point.

The two-year difference equates to about 75 basis points, the syndicate source said.

Given the longer tenor, the bond is priced a bit cheaper, and once it’s priced, that extra option value is attractive, the source said.

SunEdison, which has four older convertible bonds, priced the two new tranches, including $375 million of 2.625% eight-year convertibles and $375 million of 3.375% 10-year convertibles, both with an initial conversion premium of 40%.

“They are becoming a serial issuer like Chesapeake,” a trader said, referring to Chesapeake Energy Corp., which has issued more than a dozen convertible issues over the years.

The new SunEdison deals have an over-allotment option for up to $150 million of additional notes to be divided between the two tranches.

Pricing came at the rich end and beyond the rich end of talk for both issues, which was for a 2.625% to 3.125% coupon for the 2023 notes and a 3.375% to 3.875% coupon for the 2025 notes, with a premium talked at 32.5% to 37.5% for both issues.

SunEdison’s existing 2.375% convertibles due 2022, of which $460 million priced on Jan. 21, 2015, traded at 130.776 at the end of the session, which was up 2.4 points, according to Trace data.

SunEdison’s 0.25% convertibles due 2020, of which $600 million priced June 4, 2014, traded at 120.128, which was up 2.9 points, Trace said.

SunEdison’s 2% convertibles due 2018, of which $600 million priced Dec. 12, 2013, changed hands at 205, which was up a handful of points, and SunEdison’s 2.75% convertibles due 2021, a second tranche of $600 million that also priced Dec. 12, 2013, traded at 203.

About $300 million of the 2018 notes and $300 million of the 2021 notes are being exchanged for the shares underlying those notes plus about $62.5 million in cash.

Cowen to price preferreds

Cowen plans to price $105 million of cumulative perpetual convertible preferred shares after the market close Wednesday that were talked to yield 5.375% to 5.875% with an initial conversion premium of 15% to 20%, according to market sources.

The 105,000 shares of series A convertible preferreds have a $1,000 par value and will be sold under Rule 144A. There is a greenshoe for up to 15,750 of additional shares.

Joint bookrunners are Nomura Securities International, Inc., SunTrust Robinson Humphrey Inc. and Cowen and Co. LLC.

The preferreds are non-callable for five years and then are provisionally callable if the common stock exceeds 150% of the conversion price.

In connection with the pricing of the notes, the company plans to enter into a capped call option transaction with Nomura.

Proceeds will be used to fund the capped call and for general corporate purposes.

New York-based Cowen is a financial services company.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Cowen Group Inc. Nasdaq: COWN

Nortel Networks Corp. OTC: NRTLQ

SunEdison Inc. Nasdaq: SUNE

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