j2 Global edges par in active trade; planned Sea notes look cheap at midpoint of talk

By Rebecca Melvin

New York, Nov. 13 – j2 Global Inc.’s newly priced 1.75% convertibles dominated Wednesday’s trading action, edging higher on an outright basis and gaining on swap after the Los Angeles-based internet services provider priced $500 million of the seven-year notes at the midpoint of price talk, according to market sources.

The j2 Global paper traded up to about 101 out of the gate and expanded by 0.75 point to a point on a dollar-neutral basis, a New York-based market source said.

j2’s existing 3.25% convertibles due 2029 were trading off 0.4 point at 145.94 in light volume.

No other issues traded nearly as actively as the new j2 notes, of which more than $120 million changed hands by late morning on Wednesday.

But market players were eying more new paper expected to price after the market, including Sea Ltd.’s $1 billion of five-year convertible notes, which were seen a couple of points cheap at the midpoint of price talk.

Using a credit spread of 300 basis points over Libor and 40% vol., the Sea notes were worth 102.40 at the mids, a New York-based trader said.

The Sea deal, which was announced late Tuesday, was being talked to yield 0.75% to 1.25% and with a 40% to 45% initial conversion premium.

Sea shares dropped $1.58, or 4.3%, on Wednesday to close at $35.18 on the heels of the deal being announced.

Also pricing after the market close were Halozyme Therapeutics Inc. and CyberArk Software Ltd. Halozyme plans to price $400 million of five-year convertibles notes, and CyberArk plans to sell $500 million of five-year convertibles.

The Halozyme deal was seen worth about 100.90 at the midpoint of talk, using a credit spread of 350 bps over Libor and 35% vol., a New York-based trader said. The Halo deal was being talked to yield 1% to 1.5% with an initial conversion premium of 35% to 40%.

The CyberArk deal was seen worth 101.87 at the midpoint of price talk, using a credit spread of 250 bps over Libor and 40% vol., the New York-based trader said. The CyberArk deal was being talked at a 0% coupon and a 32.5% to 37.5% initial conversion premium.

Back in secondary market trading, few issues were making a splash in the face of so much new paper hitting the market. But II-VI Inc.’s 0.25% convertibles due 2022 were down again in trade, in tandem with another drop in the underlying shares of the Saxonburg, Pa.-based laser and optical products company. Shares gapped lower for a second straight day after the company posted disappointing earnings this week.

On Wednesday, the II-VI bonds traded down nearly 2 points to as low as 98, according to Trace data. At late morning it was 98.5 and was the second most active traded bond in the U.S. convertibles market, with $7.13 million of bonds changing hands, according to Trace data. But shares continued to drag into the close, ending down $1.97, or 6%, to $30.51, down again after falling 7.6% on Tuesday.

On Monday, the II-VI convertibles were trading with a 102 handle and last week they were 104 to 104.5.

j2 dominates trading

The initial buyers of j2 Global’s new bonds were mainly outright investors, or long-only market players, a syndicate source said.

The new paper traded at 100.5 in the gray market ahead of the market open. At late morning Wednesday they were seen changing hands at 100.875 with the underlying shares up 0.5%. The shares continued to move higher by $1.97, or 2.1%, to $96.47.

Proceeds of the new non-callable for life notes will be used to pay off all amounts outstanding under an existing senior secured credit facility of j2 Global’s wholly owned subsidiary, j2 Cloud Services, LLC. The remainder of proceeds are earmarked for general corporate purposes, which may include acquisitions, although j2 Global does not have any agreements or commitments for any material acquisitions or investments at this time.

The Rule 144A notes were talked to yield 1.5% to 2% with an initial conversion premium of 30% to 35%.

Sea notes eyed

The Rule 144A and Regulation S deal, which has a $150 million greenshoe, was expected to price after the market close on Wednesday. Goldman Sachs in the bookrunner.

The notes looked to be worth 102.4 at the midpoint of talk, according to a New York-based source.

The notes are non-callable until Dec. 1, 2022 and then are provisionally callable if shares exceed 130% of the conversion price. There is also a clean up call for amounts of less than $75 million of the notes remaining outstanding, and they are callable due to tax law changes.

There is takeover protection.

In connection with the pricing of the notes, Sea expects to enter into capped call transactions with the initial purchases or their counterparties.

Proceeds will be used to pay the cost of the capped call transactions and for business expansion and other general corporate purposes.

Mentioned in this article:

CyberArk Software Ltd. Nasdaq: CYBR

Halozyme Therapeutics Inc. Nasdaq: HALO

j2 Global Inc. Nasdaq: JCOM

II-IV Inc. Nasdaq: IIVI

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.