New inContact gains on swap; Whiting Petroleum extends gains; convertibles trendless

By Rebecca Melvin

New York, March 25 – inContact Inc.’s newly priced 2.5% convertibles due 2022 traded up 4 to 5 points on an outright basis and expanded about 2.75 points on swap Wednesday after the Salt Lake City-based internet software company priced $100 million of the seven-year notes at the rich end of talked terms.

The inContact 2.5% convertibles were quoted at 104.625 bid, 105.375 offered versus an underlying share price of $10.90 in the early going, a syndicate source said.

Later, the new bonds were somewhat lower with lower shares. A syndicate source quoted them at 104 to 105 at late afternoon, and a second source said they were in the mid-104 context.

Whiting Petroleum Corp.’s 1.25% convertibles, which debuted in the convertibles market on Tuesday, moved higher again on Wednesday after a strong push up on Tuesday and as the underlying shares stopped Tuesday’s bleeding. The shares lost 30% in Tuesday’s session.

Elsewhere, Cheniere Energy Inc.’s convertibles edged a little lower in active trade and were quoted “around 82.5 to 83,” a New York-based trader said.

There were no clear trends in the overall convertibles market as equity markets sold off, a trader said.

He noted that convertibles tend to quiet down when stocks trade off. “There was some selling in certain names, but there were also buyers, and there was no overwhelming flow except flow in stocks,” he said.

Directionally, there was no clear trend as some market players were taking off risk and some were buying the risk, he said.

“We’ve seen some outright guys come in to buy the dip in some of these stocks,” he said.

There was a big seller of Illumina Inc. But the Illumina bond’s pricing remained flat, or in line, on a dollar-neutral, or hedged, basis.

Stocks fell. The Nasdaq composite index took the brunt of the pullback, sliding 118.21 points, or 2.4%, to 4,876.52.

The Dow Jones industrial average came off 292.60 points, or 1.6%, to 17,718.54, and the S&P 500 stock index slid 30.45 points, or 1.5%, to 2,061.05. A sell-off in semiconductors spread to the broader market, and the Philadelphia Stock Exchange Semiconductor index dropped 4.6%.

In economic data, orders for durable goods came in worse than expected, dropping 1.4% in February from a month earlier, the Commerce Department said Wednesday. Economists expected orders for these goods meant to last at least three years to rise 0.2%.

New inContact expands

inContact’s new 2.5% convertibles were seen last at 104 bid, 105 offered with the underlying shares at $10.65, a syndicate source said.

Shares were moving around, so the bond was seen higher and also lower in the mid-104 context.

The inContact shares closed up 6 cents, or 0.6%, to $10.60. That was lower compared to a nearly 4% climb in the early going.

The bonds traded actively in the early session and quieted down later, a syndicate source said.

InContact priced $100 million of the seven-year notes after the market close on Tuesday with a 2.5% coupon and a 35% initial conversion premium. That was the rich end of talk for a 2.5% to 3% coupon and 30% to 35% premium.

The Rule 144A deal has a $15 million greenshoe and is being sold via bookrunner Jefferies & Co.

About $22.7 million of the proceeds will be used to retire about $11.7 million of term loans and capital lease obligations and $11 million of outstanding draws on a secured revolving credit facility. Remaining proceeds will be used for general corporate purposes.

The notes are non-callable until April 1, 2019 and then are provisionally callable if the company’s stock trades above 130% of the conversion price. The notes have takeover and dividend protection and net share settlement.

Whiting Petroleum gains

Whiting Petroleum’s 1.25% convertibles ended Wednesday’s session at 106.25 bid, 106.75 offered, a New York-based trader said.

Whiting shares were up 66 cents, or 2%, to $31.57.

The bonds were “better to buy,” he said.

On a dollar-neutral basis, it was difficult to say how the bonds performed because many market players have diverged from the theoretical delta of 65%.

“We are on a light delta,” he said, and many market players are very light the stock given the stock slump going into the pricing of the deal, he said.

The stock fell 30% amid a shift of expectations among investors who were eyeing a potential takeout.

But now that view has changed. “Whiting Petroleum is giving up on finding a strategic buyer,” Gimme Credit analyst Evan Mann wrote in a note Wednesday.

The independent credit research firm said that Whiting’s acquisition of Kodiak Oil & Gas looks like a good longer term strategic fit, but that “the continuing decline in energy prices will likely result in some near term indigestion.”

“The company’s weak hedged position makes cash flow more vulnerable to market conditions and we have concerns regarding the company’s willingness to significantly scale back growth spending plans,” Gimme Credit’s Mann wrote.

Mentioned in this article:

Cheniere Energy Inc. NYSE: LNG

Illumina Inc. Nasdaq: ILMN

inContact Inc. Nasdaq: SAAS

Whiting Petroleum Corp. NYSE: WLL

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