GoPro prices upsized convertibles; Prospect Capital paper active; Cobalt firm in secondary

By Stephanie N. Rotondo

Seattle, April 7 – The convertible bond market got another new issue on Friday as GoPro Inc. priced its previously announced Rule 144A offering of convertible senior notes due 2022.

Initially, the new issue – GoPro’s first convertible deal – was seen trading sub-par but later traded up as the day wore on.

The company sold $175 million of the notes at par to yield 3.5% with an initial conversion premium of 25%.

The deal came in line with price talk but upsized from $150 million.

J.P. Morgan Securities LLC ran the books.

From Thursday’s business, Prospect Capital Corp.’s $225 million of 4.95% convertible senior notes due 2022 – which came with an initial conversion premium of 10% – were making up a sizable portion of the day’s volume, according to a trader.

The deal priced at 98% of par.

But oddly enough, it wasn’t the new issues that were the most actively traded convertibles of the day. That honor went to Cobalt International Energy Inc.

The oil producer’s debt continued its upward climb in the final trading session of the week, following along with yet another more than 1% gain in crude oil prices.

For its part, oil prices hit a one-month high and were up 3% for the week in response to a U.S. airstrike on Syria. The strike was in response to reports that the Syrian government had unleashed chemical weapons on its people.

The military action raised concerns that tensions in the country could spread throughout the oil-rich region.

GoPro comes upsized

GoPro’s 3.5% convertible senior notes due 2022 finished the session on a high note, though the new issue did get off to a rocky start.

A trader saw the convertibles hitting highs in the 103 area. But in early dealings, a trader said he saw the issue printing just a couple times in a 98 to 98.5 context, though he saw offers for the paper at 102.

GoPro’s stock was moving up in the wake of the new deal, rising 4 cents to $8.55.

One trader wasn’t much impressed with the deal, deeming the name a “high-tech GNC,” referring to the Pittsburgh-based GNC Holdings Inc., a supplement company that has faced some issues recently.

It is also notable that the company is using $78 million of the proceeds from the deal to fund a prepaid forward stock purchase transaction.

The remaining funds will be used for general corporate purposes.

The notes are non-callable for life and are putable upon a fundamental change.

The conversion rate will also be increased upon a fundamental change.

The initial conversion rate is 94.0071 shares per each $1,000 of notes. That equates to an initial conversion price of $10.64.

Prior to Jan. 15, 2022, holders can convert the paper under certain circumstances. After that date, but prior to maturity, the notes are convertible at any time.

Conversions will be settled with class A common stock, cash, or a combination of the two.

GoPro is a San Mateo, Calif.-based technology company that manufactures cameras and develops its own apps and video editing software.

Prospect deal rises

Prospect Capital’s new 4.95% convertibles gained ground in Friday trading, just one day after the company priced the deal.

Toward the end of the day, a market source pegged the paper at 99.5, which was called up over 1.25 points.

At mid-morning, a trader pegged the paper at 98.5 to 98.75.

The issue came at 98% of par.

The stock was initially higher but ended the day off 2 cents at $9.05.

Goldman Sachs & Co. is the bookrunner.

The company can call the convertibles after April 15, 2022 at par plus accrued interest and a make-whole premium.

Conversions will be settled in common stock. The initial conversion rate is 100.2305 shares per each $1,000 of notes, or $9.98 per share.

Proceeds will be used to repurchase from time to time a portion of the company’s 5.375% convertible senior notes due 2017 and its 5.75% convertible senior notes due 2018.

Prospect Capital is a New York-based business development company.

Cobalt firm again

Cobalt International Energy’s convertible bonds got another boost as a U.S. airstrike in Syria boosted oil prices.

At one shop, a source saw the 2.625% convertible notes due 2019 at 41.5, a gain of nearly 7 points on the day. The 3.125% convertible notes due 2024 were meantime called 6.25 points better at 32.5.

At another desk, a source saw the 2.625% convertibles rising 8.25 points to 43, while the 3.125% convertibles improved 4 points to 30.25.

The underlying shares added 15 cents, or 31.63%, to 63 cents.

Rising oil prices have helped Cobalt’s securities inch back upward. But given that the company has not yet been able to increase production – as well as the fact that it is highly leveraged – concerns still abound.

In fact, in mid-March, Timothy J. Cutt, chief executive officer, said that Cobalt was facing three options: sell assets to fund core projects, find a merger partner or simply sell itself entirely.

Cobalt has been attempting to sell off its assets in Angola, as well as Shenandoah in the Gulf of Mexico.

But thus far, those sales have not materialized. Nor has any word of the company’s efforts to stabilize itself.

Mentioned in this article:

Cobalt International Energy Inc. NYSE: CIE

GoPro Inc. Nasdaq: GPRO

Prospect Capital Corp. Nasdaq: PSEC

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