AMD notches positive debut despite weaker broader markets; AMD, PDC Energy deals price

By Rebecca Melvin

New York, Sept. 9 – Advanced Micro Devices Inc.’s 2.125% convertibles due 2026 traded up upon release for secondary market trading on Friday despite lower shares and negative moves in the broader markets, sources said.

The new AMD 2.125% convertibles were heard at 101.5 bid, 102 offered versus an underlying share price of $6.10, a New York-based trader said at late morning.

By the market close, the new bonds pared gains, with the underlying shares lower near $6.00, which was the issue price of a concurrent offering of common stock.

But the deal was notable due to its impeccable timing, a New York-based trader said. AMD priced an upsized $700 million of the senior notes beyond the rich end of talked terms just ahead of a strong turn lower in equities and rate worries crimping the credit and convertibles markets.

“The AMD deal could be a sign of a top in the market because the long bond is down 2 points and the deal still did well. Now there’s fear of a rate hike, stocks are down and there is weakness in credit and converts. But “they [AMD] timed the market perfectly. They got it in before the stock was down and the move in the long bond, so that’s really good for them,” the trader said.

Shares of the Sunnyvale, Calif.-based chip maker closed down 32.5 cents, or 5%, at $5.90.

Also in the primary market on Friday was PDC Energy Inc.’s new 1.125% convertible due 2021. But those bonds didn’t really trade, a market source said, and Prospect News didn’t hear a price for them.

The Denver-based energy company priced an upsized $175 million of the five-year senior paper beyond the rich end of talked terms. PDC also priced a common stock offering, which was upsized to $500 million for shares at $63.25 each.

PDC shares were moving in the opposite direction of AMD’s and were up $2.24, or 3.5%, at $67.06 at late morning.

The overnight deal was initially talked at $100 million in size, and pricing came beyond the rich end of talked terms for a 1.25% to 1.75% coupon and a 27.5% to 32.5% premium.

Back in established issues, there was weakness particularly in some high-beta names such as Microchip Technology Inc. and Dycom Industries Inc., a source said.

“Things were pretty weak today, and AMD, which would not have gotten done post-move, got done,” a trader said.

For the week, which was a short, four-day holiday week, convertibles did well. Five new deals launched and priced for $2.33 billion in base-deal proceeds, or $2.61 billion if over-allotment options are exercised.

But the broader markets turned negative on Friday.

The Dow Jones industrial average fell 394.46 points, or 2%, at 18,085.45; the S&P 500 stock index lost 53.49 points, or 2.5%, to 2,127.81, and the Nasdaq stock market shed 133.58 points, or 2.5%, to 5,125.91.

AMD puts in strong debut

AMD, a Sunnyvale, Calif.-based chip maker, upsized its new deal to $700 million plus a $105 million greenshoe, which was up from an originally talked base deal of $450 million.

One trader noted how the deal came to market at the perfect moment ahead of a drop off in stock and credit markets and a return of fear about a rate hike.

It was “timed with the market perfectly. Everyone is in a buying mood, but now people are probably going to be more selective,” a trader said.

The new AMD 2.125% convertibles were seen around par last with the underlying share price under the $6.00 per share price tag of its $600 million common stock offering that priced Thursday concurrently with the bond issue.

The upsized $700 million of 10-year convertible senior notes priced at par to yield 2.125% with an initial conversion premium of 33%. Pricing came beyond the rich end of talked terms for a 2.375% to 2.875% coupon and a 25% to 30% premium.

There is a greenshoe for up to $105 million of additional notes, and AMD also priced $600 million of common shares at $6.00 each, concurrently with the convertibles.

Joint bookrunners are Morgan Stanley & Co. LLC, Barclays, Credit Suisse Securities (USA) LLC, BofA Merrill Lynch and Wells Fargo Securities LLC.

The notes are non-callable with no puts, and there is takeover and dividend protection. There is also net share settlement.

Proceeds will be used to repay up to $226 million of borrowings under an amended and restated loan agreement and to purchase up to $1 million of the company’s straight notes, with any remaining proceeds to be used for capital expenditures, working capital or other general corporate purposes.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Dycom Industries Inc. NYSE: DY

Microchip Technology Inc. Nasdaq: MCHP

PDC Energy Inc. Nasdaq: PDCE

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