Intel up ahead of earnings; Iconix adds a point; Belden, Blackhawk Network launch deals

By Rebecca Melvin

New York, July 20 – Intel Corp.’s two convertible bond issues traded quietly and slightly up on Wednesday ahead of the Santa Clara, Calif.-based semiconductor giant’s second-quarter earnings report expected after the market close.

Intel shares gained 1.5% during regular trading to close at $35.69, but they traded down 2% in after-hours action, seemingly indicating that the earnings report disappointed a little bit.

The semiconductor bellwether reported profit that was sharply lower than the same period last year on revenue that was largely in line with expectations. So far Intel has cut about 6,000 jobs out of 12,000 that it expects to shed, or about 11% of its global workforce, and said that looking ahead, it expects revenue growth in the mid-single digits, which is in line with its previous guidance.

Cypress Semiconductor Corp.’s 4.5% convertibles due 2022, which priced a month ago, were also in action trading around 112, or higher by a point on an outright basis. The bond was quoted at 112.08 versus a share price of $11.64 and at 111.35 versus a share price of $11.51, according to a New York-based trader.

Micron Technology Inc.’s 3.125% convertibles due 2032 traded up nearly 5 points to 153.178, according to Trace data. Meanwhile the lower-dollar paper of the memory chip manufacturer, or the 3% convertible notes due 2043, was up more than 2 points, ending the day at 79.5.

The equity meantime rose 37 cents, or 2.8%, to $13.59.

In the primary market, two chunky deals launched for pricing on Thursday. Belden Inc. plans to price $450 million of convertible mandatory preferreds ahead of the market open on Thursday that were talked to yield 6.25% to 6.75% with an initial conversion premium of 10% to 15%, according to a syndicate source.

And Blackhawk Network Holdings Inc. plans to price $425 million of 5.5-year convertible senior notes after the market close on Thursday that were talked to yield 1.5% to 2% with an initial conversion premium of 35% to 40%.

Otherwise trading was fairly quiet and sparked primarily by earnings news.

In the distressed arena, paper was “better across the board,” a Connecticut-based trader said.

The distressed space has been firm for the last several weeks, and on Wednesday, things were up by about a point overall, the trader said.

Iconix Brand Group Inc.’s 1.5% convertibles due 2018 traded at 82.625, according to Trace data, and were seen at 83 bid, 83.5 offered at the market close, according to a Connecticut-based trader. That was up by about a point, he said.

Cobalt International Energy Inc.’s convertibles were also seen up about a point with shares of the Houston-based oil-focused exploration and production company up 14 cents, or nearly 10%, at $1.59.

“Everything has gone higher. People are chasing yield and there is nothing stopping it right now. Yields are low and people are looking for yield anywhere you can find it,” a trader said.

Gains in tech names led the Nasdaq composite stock index up 53.56 points, or 1%, to 5,089.93. The S&P 500 stock index was up $9.24, or 0.4%, at 2,173.02.

Intel trades a little better

The more equity-sensitive Intel 3.25% convertibles due 2039 were more active in the early going than the more-balanced Intel 2.95% convertibles due 2035. The Intel 3.25% bonds traded up to about 172 from around 168 on Tuesday, according to Trace data. It closed at 173.

The Intel 2.95% convertibles were quieter after being more active on Tuesday. They traded at 132.625, according to Trace data, which was within the generally tight range in which they have been trading for more than a week.

Intel shares were up 27 cents, or 0.8%, at $35.42.

Intel reported a profit of $1.33 billion, or 27 cents per share, down from $2.71 billion, or 55 cents per share in the year-earlier period. Excluding items, earnings were 59 cents and revenue increased 2.6% to $13.53 billion.

Chief executive Brian Krzanich said revenue met the company’s expectations and profit was better than expected. He also said the restructuring program was “solidly on track.”

Traders were eyeing the report to see how its PC-related sales were holding in and whether the company is continuing to shift its revenue mix to other market segments like the internet of things.

Belden to price mandatories

Belden plans to price $450 million of convertible mandatory preferreds ahead of the market open on Thursday.

The St. Louis-based company makes networking, connectivity and cable products. The registered, off-the-shelf deal has a $67.5 million greenshoe and was being marketed by joint bookrunning managers J.P. Morgan Securities LLC, Guggenheim Securities LLC, Deutsche Bank Securities Inc. and Goldman Sachs & Co.

Proceeds are earmarked for general corporate purposes, including investments in or extensions of credit to subsidiaries or financing possible acquisitions, capital expenditures or business expansion.

Blackhawk to price

Blackhawk Network Holding plans to price $425 million of 5.5-year convertible senior notes after the market close on Thursday.

The Pleasanton, Calif.-based company is a prepaid, gift card and payments services company. The Rule 144A deal has an over-allotment option for up to an additional $35 million of notes and was being marketed by joint bookrunners BofA Merrill Lynch, Wells Fargo Securities LLC, SunTrust Robinson Humphrey Inc. and MUFG.

Senior co-managers are BMO Capital Markets and PNC Capital Markets LLC, and co-managers are Barclays, Raymond James, Fifth Third Securities and BNP Paribas Securities Corp.

The notes are non-callable with no puts and have full dividend protection via conversion ratio adjustment and change-of-control protection.

There is contingent conversion if shares exceed 130% of the conversion price and net share settlement.

In connection with the pricing of the notes, Blackhawk plans to enter into convertible note hedge and warrant transactions with one or more of the initial purchasers of the notes or their affiliates or a call spread.

Proceeds are earmarked to repay borrowings under its credit facility, to repurchase shares of the company’s common stock from certain purchasers of the notes, to pay the net cost of the convertible note hedge transactions, to pay related transaction fees and expenses, and for general corporate purposes, including future acquisitions.

Up to $35 million of the net proceeds will be used to repurchase common shares in privately negotiated transactions concurrently with the offering of notes.

Mentioned in this article:

Belden Inc. NYSE: BDC

Blackhawk Network Holdings Inc. Nasdaq: HAWK

Cypress Semiconductor Corp. NYSE: CY

Cobalt International Energy Inc. NYSE: CIE

Iconix Brand Group Inc. Nasdaq: ICON

Intel Corp. Nasdaq: INTC

Micron Technology Inc. NYSE: MU

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