Primary market sees new deal from Nabors Industries; calendar builds; Illumina pops

By Stephanie N. Rotondo

Seattle, Jan. 10 – The convertible bond market had a new deal to play with on Tuesday, as Nabors Industries Inc. brought $500 million of 0.75% exchangeable senior unsecured notes due 2024.

The deal came with an initial exchange premium of 40%. Initial price talk was for a 0.75% to 1% yield and with a premium of 40%.

Citigroup Global Markets Inc. and Goldman Sachs & Co. ran the books.

The new issue was well priced, according to one sellside source, who saw the paper trading around 102 in early dealings.

“That is definitely the focus,” the trader said of the paper.

Given that the issue was performing well, the trader added that it was “slowly dragging up the rest of the market with it.”

He also opined that the deal would be well absorbed.

“Bonds traded really well,” said another trader. The bonds “traded 102.25 right out of the gate with the stock down.”

“Bonds don’t model particularly cheap,” the trader added, but the issue is “doing well.”

In the wake of the offering, the underlying equity declined 28 cents, or 1.56%, to $17.69.

The exchange rate is 39.7488 shares per each $1,000 of notes, representing $25.16 per share. Exchanges will be settled with cash, common stock, or a combination thereof, at the company’s option.

Proceeds will be used to prepay the remaining balance of the subsidiary’s unsecured term loan due 2020, as well as to pay the cost of capped call transactions. Any remaining proceeds will be used for general corporate purposes, including to repay or repurchase other debt.

The company is a wholly owned subsidiary of Hamilton, Bermuda-based Nabors Industries Ltd., an oil and gas drilling contractor.

Pipeline swells

In addition to the Nabors pricing, the calendar built up on Tuesday, with new deals announced by MagnaChip Semiconductor Corp., NICE Systems Inc. and Veeco Instruments Inc.

MagnaChip is offering $65 million of exchangeable senior notes due 2021 via its MagnaChip Semiconductor SA subsidiary.

The yield is talked at 5% to 5.25%, with an exchange premium of 27.5% to 30%, according to a market source.

Barclays and Citigroup Global Markets Inc. are the joint bookrunners of the Rule 144A deal.

NICE is meantime selling $225 million of exchangeable senior notes due 2024, with yield talked at 1.5% to 2% and an exchange premium of 17.5% to 22.5%.

The parent company is NICE Ltd.

J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Citigroup are the bookrunners of the Rule 144A deal.

As for Veeco, it is planning a $200 million offering of convertible senior notes due 2023.

Barclays and Wells Fargo Securities LLC are the joint bookrunners.

Illumina gets a boost

Illumina Inc.’s convertibles were a point better on swap and up 3 points outright, a trader reported Tuesday.

The trader noted that the issues “should be active on the back of their announcement of their new DNA sequencer, which is a game changer in the field of genetics.”

Another market source saw the convertibles rising as much as 5 points on the day, seeing the 0.5% convertible notes due 2021 straddling 103 and the 0% convertible notes due 2019 around par.

Both issues were up from previous levels in a 96 to 97 context.

Another source pegged the 0.5% convertibles at 103.19, up over 4 points. The 0% convertibles were seen at 100.4, up nearly 3.5 points.

The equity traded up $23.50, or 16.6%, to $165.04.

The San Diego-based biotechnology company released NovaSeq on Tuesday, a genome sequencer that works quicker and cheaper. In fact, the company hopes to expand on the sequencer to one day make it only $100 to decode one genome – in less than an hour.

“Incredible stuff,” a trader remarked.

Illumina also provided a better-than-expected fourth-quarter revenue forecast of $619 million.

Analysts polled by Thomson Reuters predicted sales of $612.5 million.

On the news, analysts at Bank of America Merrill Lynch upped Illumina’s stock price target to $175 from $145. The firm also upgraded the equity to “buy” from “neutral.”

Mentioned in this article:

Illumina Inc. Nasdaq: ILMN

MagnaChip Semiconductors Corp. NYSE: MX

Nabors Industries Inc. NYSE: NBR

NICE Systems Inc. Nasdaq: NICE

Veeco Instruments Inc. Nasdaq: VECO

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