ON Semiconductor up on swap on debut; LinkedIn adds on swap; Anadarko launches offering

By Rebecca Melvin

New York, June 3 – ON Semiconductor Corp.’s newly priced 1% convertible bonds rose on an outright basis and were better on swap on their debut in secondary market dealings on Wednesday after the Phoenix-based semiconductor company priced $600 million of the senior notes at the rich end of talked terms.

The new ON Semiconductor bonds due 2020 were seen at 103.25 bid, 103.75 offered toward the end of the session versus an underlying share price of $13.25.

A trader said that a big chunk of the day’s volume was in the new ON Semiconductor convertible, but it was not widely traded.

“It’s not being quoted in the Street right now. It’s all being done on swap and the underwriters are controlling it,” the trader said at late morning.

LinkedIn Corp.’s convertibles were active, with the bonds up 0.5 point on a dollar-neutral basis as shares gained 4% after JPMorgan put the Mountain View, Calif.-based business-oriented social networking service company on its focus list, a New York-based trader said.

After the market close, Anadarko Petroleum Corp. launched a mandatory deal for $325 million tangible equity units, exchangeable into shares of its subsidiary Western Gas Equity Partners LP.

Anadarko is also pricing a $125 million follow-on offering of common units of Western Gas Equity Partners, with Anadarko as selling shareholder.

New ON Semi trades up

ON Semiconductor’s new 1% convertibles due 2020 were quoted late in the session at 103.25 bid, 103.75 offered versus an underlying share price of $13.25.

The deal priced off of a $12.98 share price at the market close on Tuesday, so those bonds expanded 2.5 points on a dollar-neutral, or swap, basis.

ON Semiconductor shares ended up 28 cents, or 2.2%, at $13.26.

The bonds priced with a 42.5% initial conversion premium, and the terms represented the rich end of talked terms, which was for a coupon of 1% to 1.5% and a premium of 37.5% to 42.5%.

Ahead of final terms being fixed, the deal looked to have a fair value of 103 at the midpoint of talk, using a lower credit spread of 275 bps over Libor and a 33% vol.

There is an over-allotment option for up to $90 million of additional notes. Joint bookrunners were Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and BofA Merrill Lynch.

The bonds are non-callable and have no puts.

In connection with the pricing of the notes, the company entered into convertible note hedge and warrant transactions, or a call spread. The strike on the warrant transactions is $25.96, which boosts the initial conversion premium from the issuer’s perspective to 100%.

Proceeds are earmarked to fund the cost of the call spread, to fund the repurchases of up to $100 million of ON Semiconductor common stock, of which about $70 million was purchased from initial purchasers of the notes, to repay $350 million of borrowings outstanding under its revolver and for general corporate purposes, including additional share repurchases and potential acquisitions.

Anadarko to price mandatory

Anadarko, the oil and gas exploration and production company based in the Woodlands, Texas, launched an offering late Wednesday for $325 million tangible equity units, exchangeable into shares of Western Gas Equity Partners.

The deal was talked to yield 7.5% to 8% with an initial conversion premium of 20% to 25%.

Anadarko is also pricing a $125 million follow-on offering of common units of Western Gas Equity Partners, with Anadarko as selling shareholder.

Western Gas Equity Partners is a subsidiary of Anadarko formed to own partnership interests in Western Gas Partners LP, a separate subsidiary formed to acquire and develop midstream energy assets.

The registered, three-year mandatory exchangeables have an over-allotment option of $48.75 million and were being sold via bookrunner JPMorgan.

The mandatory deal of $50 par units was expected to price after the market close on Thursday. It is non-callable and has takeover and dividend protection.

Proceeds are earmarked for general corporate purposes.

Mentioned in this article:

Anadarko Petroleum Corp. NYSE: APC

LinkedIn Corp. Nasdaq: LNKD

ON Semiconductor Corp. NYSE: ON

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