Upsized Canadian Solar jumps on debut; upsized AMAG adds; Imperial Holdings, Akamai on tap

By Rebecca Melvin

New York, Feb. 12 - Canadian Solar Inc.'s newly priced 4.25% convertibles gained on both an outright and hedged basis on their debut Wednesday after the Markham, Ont.-based solar power components company priced an upsized $130 million of the five-year senior notes at mixed terms.

The Canadian Solar paper jumped out of the gate to about 105 and ended around 104 with shares tipping slightly lower after early strength. The paper was said to be up 4 points on swap.

The deal ended up outshining AMAG Pharmaceuticals Inc.'s newly priced 2.5% convertibles, which traded up to 103ish in the early going Wednesday upon release for secondary market action following pricing of the Waltham, Mass.-based specialty pharmaceutical company's upsized $175 million of five-year notes at mixed terms, a Connecticut-based analyst said.

AMAG stock was a drag on the new bonds, however. The stock was down about 1% when the bonds were at 103 and subsequently sank to 3% lower.

Both deals were upsized. AMAG's convertible was upsized by $25 million from an initially talked $150 million deal size, and Canadian Solar's deal was upsized by $30 million from an initially talked $100 million.

Both deals were doing well, but Canadian Solar was doing best, a New York-based trader said, quoting the Canadian Solar convertible at 104.5 and the AMAG convertible at 102.5.

Also in the primary market, Akamai Technologies Inc. launched an offering of $500 million of five-year convertible senior notes after the market close that was expected to price after the market close on Thursday. The notes were talked at a 0% to 0.5% coupon and high premium of 45% at the midpoint of talk.

Imperial Holdings Inc., a Boca Raton, Fla.-based specialty finance company, was expected to price $70 million of five-year convertibles after the close Wednesday. The deal was being sold by bookrunner FBR Capital Markets & Co. and talked at an 8.5% to 9% coupon and 20% to 25% initial conversion premium.

Back in established issues, Covanta Holding Corp.'s convertibles were knocked down after the Fairfield, N.J.-based waste disposal and renewable energy company reported disappointing earnings that sent shares sharply lower.

The Covanta 3.25% convertibles mature in four months on June 1, 2014. They traded at about 116, which was down nearly 5 points, according to Trace data. Prospect News could not determine how the paper traded on a dollar-neutral basis.

Equities ended mixed to lower mostly on earnings, with the Standard & Poor's 500 index slipping 0.49 point to 1,819.26, snapping a four-day rally. But the Nasdaq stock market rose for a fifth straight session, ending up 10.24 points, or 0.2%, at 4,201.29, while the Dow Jones industrial average slipped 30.83 points, or 0.2%, to 15,963.94.

Canadian Solar jumps on debut

Canadian Solar's newly priced 4.25% convertibles due 2019 traded up to about the 103 mark and then kept climbing to about 105 in the early going on Wednesday, when underlying shares were up 34 cents, or 1%, at $36.51 at midmorning.

The new Canadian Solar issue ended at 104 with the underlying shares down 8 cents, or 0.2%, to $36.09.

That represented an expansion of 4 points on swap, a New York-based trader said. "It did really well."

The stellar debut was something of a surprise given that the company's connection to China with production capacity in that country seemingly scaring off some would-be investors ahead of pricing. The underwriter went out with a credit spread of 900 basis points over Libor, according to a Connecticut-based analyst and others had wider spreads.

But Canadian Solar was able to upsize the convertible deal to $130 million, and it priced at the rich end of 4.25% to 4.75% coupon talk, but at the cheap end of 25% to 30% talk for the premium.

Canadian Solar also priced a concurrent offering of $100 million of common stock, or 2.78 million shares at $36.00 per share, which was upsized from 2.6 million shares. There is a greenshoe of 416,700 shares, which was upsized from 390,000 shares.

Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Nomura Securities International Inc. were the joint bookrunners of both offerings, which were contingent upon each another. Co-managers were Roth Capital Partners LLC and Northland Securities Inc.

The convertibles are non-callable until Feb. 21, 2017 and then are provisionally callable if shares exceed 130% of the conversion price. There are no puts.

Proceeds are earmarked for general corporate purposes, which may include expansion of manufacturing capacity, development of solar power projects and working capital. But the company retains flexibility in proceeds use, and funds may ultimately be used for different purposes. Pending any ultimate use of proceeds, Canadian Solar intends to invest in short-term, marketable instruments.

Canadian Solar is a Markham, Ont.-based solar power components producer.

AMAG adds early

AMAG Pharmaceuticals' newly priced 2.5% convertibles due 2019 traded up to 103ish in the early going Wednesday. It was quoted at 102.75 bid, 103.50 offered with the stock down about 21 cents, or 1%, at $19.86 at midmorning.

There was a Trace print a bit higher at 103.625, but the underlying shares ended lower, down much lower at $19.48, which was off 63 cents, or 3%.

The deal was seen very cheap ahead of final terms being set, but it wasn't able to outperform the Canadian Solar deal.

AMAG priced an upsized $175 million of five-year convertibles to yield 2.5% with an initial conversion premium of 35%. That was the midpoint of coupon talk and the rich end of premium talk.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were joint bookrunners, with Cowen & Co. LLC and Robert W. Baird & Co. acting as co-managers.

The notes are non-callable with no puts, except a change-of-control put, and they also have net share settlement and contingent conversion if shares exceed 130% of the conversion price.

The deal came with a call spread, which was paid for with proceeds of the convertible deal. The majority of proceeds however are being used for working capital and other general corporate purposes, including to fund possible acquisitions or investments in complementary businesses, services or technologies.

Waltham, Mass.-based AMAG is a specialty pharmaceutical company.

Akamai on tap

Convertibles players were eyeing the new deal of Akamai Technologies admiringly after the market close. The strong credit with a larger deal is a plus for the convert universe. Plus Akamai is a known entity in the space. "They've done converts before," a New York-based trader said.

The Rule 144A deal, being priced by Morgan Stanley, was talked at a 0% to 0.5% coupon and a 42.5% to 47.5% initial conversion premium. There is a $75 million greenshoe.

The bonds will be non-callable for life, and were pricing together with a call spread, or convertible note hedge and warrant transactions.

A portion of the proceeds will be used to pay the net cost of the call spread and about $60 million of proceeds will be used to buy back shares from purchasers of the notes.

Remaining proceeds will be for working capital and general corporate purposes, including potential acquisitions and other strategic transactions.

Cambridge, Mass.-based Akamai is an internet company that provides content delivery and cloud infrastructure services.

Imperial Holdings on tap

Imperial Holdings planned to price $70 million of five-year convertible senior notes after the market close on Wednesday that were talked to yield 8.5% to 9% with an initial conversion premium of 20% to 25%, according to a syndicate source.

The deal was being distributed under Rule 144A and Regulation D but was essentially a regular Rule 144A offering, according to a syndicate source.

FBR Capital Markets & Co. was marketing the deal.

The conversion price will be based on the volume weighted average price of shares over a three-day period consisting of two days prior to the announcement and one day after the announcement.

The notes are non-callable for three years and are provisionally callable thereafter if the share price exceeds 130% of the conversion price.

Proceeds will be used for, among other things, investments in the life settlement asset class, including by lending against portfolios of life insurance policies and by strategically acquiring life insurance policies in the secondary and tertiary markets.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

Canadian Solar Inc. Nasdaq: CSIQ

Covanta Holding Corp. NYSE: CVA

Imperial Holdings Inc. NYSE: IFT

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