Morning Commentary: Discounted Restoration Hardware trades below par; planned Ctrip.com seen cheap

By Rebecca Melvin

New York, June 18 – Restoration Hardware Holdings Inc.’s new 0% convertibles had been edging to par after the $250 million of five-year senior notes were reoffered at a discount to par of 98.75, market sources said.

The new Restoration Hardware bonds were seen at 99 before the open.

Share were a little higher in the early going and that helped the deal. Shares of the Corte Madera, Calif.-based specialty retailer were last down 0.1%.

The planned $1 billion deal of Ctrip.com International Ltd., which was launched after the market close Wednesday, was seen modestly cheap at talked terms.

One trader was using a credit spread of around 550 basis points over Libor and a 40% vol. on both tranches.

A second source said he got the $500 million of 2020 notes at a 101.85 valuation. The $500 million of 2025 notes came to fair value of 102.65.

Ctrip shares were down $2.18, or nearly 3%, at $73.25.

One trader saw the deal modestly cheap but said “the question is how many people are going to want $1 billion of Chinese exposure.”

Still he thought the deal would do fine.

He also said the weight of the new deals was not pressuring the existing space. There was no evidence that portfolio managers were lightening up to make room for the new paper, he said.

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