New SunPower adds dollar neutral; existing SunPower gains; Infinera looks a little cheap

By Rebecca Melvin

New York, May 23 - SunPower Corp.'s newly priced 0.75% convertible debentures added on an outright and dollar-neutral, or hedged, basis, in early trade Thursday after the $300 million deal came at the rich end and midpoint of price talk. A Total SA subsidiary agreed to purchase $200 million of the deal, leaving only $100 million to be offered to the public, so it was not widely traded.

SunPower's existing 4.75% convertibles were also trading and were said to have expanded about 0.5 point dollar neutral, which was on top of an improvement on Wednesday.

Also in the primary market, Infinera Corp.'s planned $100 million of five-year convertibles looked fairly typical in terms of valuation - in other words, modestly cheap, at 101 to 102 at the midpoint of the talked coupon and premium ranges.

"It's like any deal and everything else that has priced," a market source said of the planned Infinera.

Elsewhere, things were mostly quiet. Bristow Group Inc.'s convertibles were quiet after the Houston-based provider of helicopter services for the energy sector reported earnings that missed estimates by a penny but exceeded expectations for revenue.

Overall, the market was described as "holding up very well," despite a slow start in the morning with the equity markets lower, a New York-based trader said.

"There was no nervous selling in convertibles, but better buyers by about three to one," the trader said.

Better buyers means it's easier to sell bonds.

Stocks started out lower, turned around by midday but ended in the red for a second straight day.

A second market source said, "The market is very quiet. I think the long weekend has started."

The source was referring to markets being closed on Monday in observance of Memorial Day.

Stocks wavered but ended lower for a second straight session following a plunge in Japan's stock market and despite positive U.S. economic data.

Initial jobless claims dropped by a better-than-expected 23,000 in the week ended May 18 to a seasonally adjusted 340,000, the Labor Department said Thursday. Economists had forecast a higher 345,000 figure for the week. The four-week moving average of claims was lower by 500 to 339,500 from the previous week's revised 340,000.

New home sales data was also positive, increasing in April by 2.3%, to a seasonally adjusted annual rate of 454,000, the second highest pace since July 2008, according to the Commerce Department. That was better than the 426,000 annualized sales rate economists had expected.

The median price of a new home sold in April was $271,600, which was up 15% from a year ago and reached a record high.

Stocks began to pull back Wednesday after the release of minutes from the last Federal Reserve policy meeting, which showed disagreement among committee members as to when to scale down asset purchases.

Federal Reserve chairman Ben Bernanke said in testimony before Congress earlier Wednesday that tapering may occur within the next several meetings, but the Fed minutes revealed that some officials are open to tapering as early as the June 18-19 meeting.

The Dow Jones industrial average slipped 12.6 points to 15,294.50; the S&P 500 stock index edged lower by 4.84, or 0.3%, to 1,650.51 and the Nasdaq stock index slipped 3.88, or 0.1%, to 3,459.42.

New SunPower adds

SunPower's newly priced 0.75% convertible senior debentures due 2018 were seen in trade during the session at 101 and ended the day at 101.875 bid, 102.375 offered versus the closing stock price of $19.12.

SunPower shares had opened about 5% lower but pared losses to end down by only 7 cents, or about 0.4%, at $19.12 in heavier-than-average trading.

The new convertible deal expanded by a point on a dollar-neutral basis.

"SunPower was pretty active, although I think it was tightly placed, or over the wall, and mostly back with the underwriters," a New York-based trader said.

SunPower's existing 4.75% convertibles due 2014 traded right around 108, which was down slightly on an outright basis, but up on a hedged basis by about 0.5 point, a New York-based trader said.

SunPower's existing 4.5% convertibles due 2015 were not heard in trade.

SunPower priced $300 million of the five-year senior convertible debentures at par after the market close Wednesday to yield 0.75% with an initial conversion premium of 32.5%.

Pricing came at the tight end of 0.75% to 1.25% yield talk and at the midpoint of the premium talk, which was 27.5% to 32.5%.

The Rule 144A deal was sold by joint bookrunners Deutsche Bank Securities Inc., RBS Securities Inc. and Credit Agricole Securities (USA) Inc., with Citigroup Global Markets Inc. and HSBC Securities (USA) Inc. acting as co-managers.

Total Gas & Power USA SAS, a subsidiary of Total SA that owns about 65% of SunPower's common stock and an institutional accredited investor, has agreed to purchase, and the initial purchasers have agreed to sell, $200 million principal amount of the debentures.

Proceeds will be used for general corporate purposes, including redeeming or repurchasing some of SunPower's outstanding debentures and funding working capital.

The debentures are non-callable with no puts and will be share settled only.

SunPower is a San Jose, Calif.-based provider of high-efficiency solar cells, solar panels and solar systems.

Infinera looks slightly cheap

Infinera's planned $100 million of five-year convertible senior notes were seen 101 bid, 102 offered Thursday ahead of final terms expected to be set after the market close Thursday, a West Coast-based trader said.

Using a credit spread of 500 basis points over Libor, a 40% vol., and minus 1 for stock borrow, the deal came at the 101 to 102 range at the midpoint of price talk.

The deal was talked at a coupon of 1.75% to 2.25% and an initial conversion premium of 32.5% to 37.5%.

There was a small discount for the small size of the deal as well.

But he said, "I heard it's going well."

The company, based in Sunnyvale, Calif., makes optical networking equipment and software.

"They haven't made any money yet," the trader said.

The Rule 144A offering has a $15 million greenshoe and is being sold via bookrunners Morgan Stanley & Co. LLC and Goldman Sachs & Co.

The notes are non-callable with no puts. They will be settled in cash, shares or a combination of cash and shares at Infinera's option, and they have contingent conversion subject to a price hurdle of 130%.

Proceeds are expected to be used for general corporate purposes, including working capital and potential strategic projects.

Mentioned in this article:

Bristow Group Inc. NYSE: BRS

Infinera Corp. Nasdaq: INFN

SunPower Corp. Nasdaq: SPWR

© 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.