IXYS pulls $60 million 20-year convertible; analysts fear subprime fallout

By Evan Weinberger

New York, June 27 - IXYS Corp. pulled a planned offering of $60 million in 20-year convertible notes Wednesday. The proposed offering was talked to yield 3.5% to 4.0% with the initial conversion premium talked at 27.5% to 32.5% and had been set to price after the close Tuesday.

A brief statement from Uzi Sasson, IXYS's chief financial officer said the decision was due to changed market conditions.

IXYS stock (Nasdaq: IXYS) dropped 89 cents or 9.1% Tuesday at $8.87 after the Santa Clara, Calif.-based semiconductor firm lowered its first quarter revenue guidance.

The IXYS bonds were set to be a Rule 144A transaction with a $15 million greenshoe via Thomas Weisel Partners. The company expected to use the proceeds to repurchase $20 to $30 million of shares concurrently with the offering and for general corporate purposes, including some acquisitions.

The markets reacted with surprise to the news, and speculation ran that the falling stock price caused the company to pull back its offering.

"My guess is that they're just very price sensitive," said one sellside analyst not connected to the deal. "A lot of companies won't actually want to go through with a convert when the stock price is down like that."

Other analysts said that fears that the effects of subprime mortgage foreclosures could spread into other markets, including convertibles.

"I'm sure it was the skittishness in the market that made it a difficult sell," said another sellside analyst not connected to the deal.

The sellside analyst continued that there was a general feeling that fund managers wanted to wait to see what happens with the subprime mortgages before they made any significant moves.

"Everybody's afraid of spillover effects," he said.

But those fears may be unfounded.

A fund manager said that while there is decreased liquidity in the market, traders were more concerned with looking bad than the actual real fallout from subprimes.

"The new issue market has been very strong," he said. "Market uncertainty does cause sort of a deer in the headlights reaction. The last thing these guys want to do is look stupid after the fact."

IXYS stock closed up $0.17, or 1.92%, in trading Wednesday to finish at $9.04. There was no talk of reoffering the convertibles.

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