Morning Commentary: ON Semiconductor does well post-pricing; Nuance stays below par

By Stephanie N. Rotondo

Seattle, March 15 – ON Semiconductor Corp.’s $500 million of 1.625% convertible senior notes due 2023 were easily dominating trading early Wednesday.

The new issue – which came late Tuesday – was doing well, trading in a par to 101 context.

The underlying stock, however, was off 20 cents, or 1.3%, at $15.15.

The deal came with an initial conversion premium of 35%. Initial price talk was for a 0.75% to 1.25% yield and a conversion premium of 35% to 40%.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, Deutsche Bank Securities Inc., BMO Capital Markets and HSBC ran the Rule 144A deal.

The initial conversion rate is 48.2567 shares per each $1,000 of notes, equal to an initial conversion price of $20.72 per share.

Proceeds will be used to repay a portion of the company’s outstanding debt under a term loan B facility and to pay related transaction fees and expenses.

The activity in the ON issue was taking attention away from Nuance Communications Inc.’s new $350 million of 1.25% convertible senior notes due 2025, a deal which priced on Monday.

Unlike ON, investors didn’t seem as excited about the Nuance deal, which fell below par in Tuesday trading.

Come early Wednesday, the convertibles were pegged in a 98.25 to 98.5 context, in line with Tuesday’s closing price.

The company’s shares slipped 2 cents to $16.92.

The initial conversion rate is 45.0106 shares per each $1,000 of notes, equal to an initial conversion price of $22.22 per share.

Nuance intends to use $99.1 million of the proceeds to repurchase stock via negotiated transactions with institutional investors participating in the offering. The remaining funds, combined with cash on hand, will be used to repurchase, redeem, retire or otherwise repay all of the outstanding 2.75% convertible senior debentures due 2031 – including a $17.8 million repurchase of the notes done concurrently with the offering.

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