Aqua America on tap; Electronics for Imaging up outright, down on hedge; Aceto jumps

By Abigail W. Adams

Portland, Me., April 15 – Despite the kick off of earnings season, the convertibles primary market was active on Monday with a new deal launched prior to the market open.

Aqua America Inc. said it plans to price $725 million of $50-par three-year tangible equity units after the market close on Wednesday.

However, the secondary space was off to a slow start on Monday with $45 million on the tape about one hour into the session and $252 million on the tape by the late afternoon.

The slow pace is expected to continue throughout the truncated trading week.

Market players were eyeing Electronics for Imaging, Inc.’s convertible notes on Monday as stock popped following news the company would be bought out.

Aceto Corp.’s 2% convertible notes due 2020 jumped following news the bankruptcy court would allow the company to sell one of its subsidiaries.

Illumina Inc.’s convertible notes remained major volume movers in the secondary space with the 0% convertible notes due 2023 expanding as holders switch out of the maturing notes.

Aqua America on tap

Aqua America plans to price $725 million of $50-par three-year tangible equity units after the market close on Wednesday with price talk for a dividend of 6% to 6.5% and a threshold appreciation price of 17.5% to 22.5%, according to a market source.

RBC Capital Markets LLC and Goldman Sachs & Co. LLC are the active bookrunners for the registered offering, which carries a greenshoe of $108.75 million.

BofA Merrill Lynch, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC are also joint bookrunners.

The tangible equity units are pricing concurrently with a $1 billion common stock offering.

Proceeds from the combined offerings, together with the proceeds from future debt financing and the private placement of common stock, will be used to fund the acquisition of Peoples Gas, according to a company press release.

The two-day marketing period may enable underwriters to price the units on the rich end of talk, a market source said.

Electronics for Imaging eyed

While volume was light, market players were eyeing Electronics for Imaging’s convertible notes as stock popped following news Siris Capital Group LLC would purchase the digital printing company for $1.7 billion in an all-cash deal.

Electronics for Imaging’s 2.25% convertible notes due 2023 skyrocketed outright but contracted dollar-neutral on the news.

The 2.25% notes rose almost 13 points outright. They were changing hands at 119.25 early in the session and climbed to 121 by the late afternoon, sources said.

While good for outright accounts, the notes were contracting on hedge, a market source said. The notes were down about 2 points dollar-neutral.

Parity on the notes is 104.25. However, the bonds have a takeout matrix and were trading up to their takeout price, sources said.

Electronics for Imaging stock traded as high as $38.33 before closing the day at $38.00, an increase of 29.25%.

The takeover is subject to shareholder approval. It is expected to close in the third quarter.

Aceto jumps

Aceto’s 2% convertible notes due 2020 jumped on Monday following news the company would sell another one of its assets as part of its bankruptcy proceedings.

The 2% notes rose about 7 points. They were changing hands around 71 with a 26% yield to maturity, a market source said.

Aceto announced that it had received bankruptcy court approval to sell Rising Pharmaceuticals and Rising’s subsidiary to Shore Suven Pharma for $15 million, plus the assumption of liabilities, according to a company news release.

The 2% notes saw a burst of activity in early March after the human health, pharmaceutical ingredients and performance chemicals company announced the proposed sale.

Aceto filed for Chapter 11 bankruptcy protection in late February.

The notes traded as low as 45 in early March but have since rebounded.

Illumina active

Illumina’s convertible notes remained major volume movers in the secondary space with one tranche expanding as holders switched out of the maturing notes.

The 0% convertible notes due 2023 traded up to 110. They were expanded about 0.25 point dollar-neutral, according to a market source.

The soon-to-mature 0% convertible notes due June 15 continued to trade around parity. The notes were changing hands around 131.5.

More than $15 million of the bonds were on the tape by the late afternoon.

Illumina stock closed Monday at $335.12, an increase of 0.96%.

Mentioned in this article:

Aceto Corp. OTCMKTS: ACETQ

Aqua America Inc. NYSE: WTR

Electronics for Imaging, Inc. Nasdaq: EFII

Illumina Inc. Nasdaq: ILMN

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