Planned GT Advanced looks cheap, lacks borrow; Suntech Power off from highs; Amgen active

By Rebecca Melvin

New York, Sept. 24 - Convertible players Monday were sizing up GT Advanced Technologies Inc.'s planned $175 million of five-year convertible notes that launched before the market open and was seen pricing after the market close.

The GT Advanced deal was talked at a 3% to 3.5% yield and a 25% to 30% initial conversion premium and was seen as cheap. But low stock borrow meant that participation by convertible arbitrage players would be limited, market players said.

Back in the secondary market, the convertibles of Suntech Power Holdings Co. Ltd. - which is in the same space as GT Advanced - slipped back to the 33 handle from a high of 35 last week, a Connecticut-based trader said.

The Wuxi, China-based company shed about 0.75 point but held on to the lion's share of last week's gain.

Amgen Inc., the Thousand Oaks, Calif.-based biotech giant, was the big trader of the day, but pricing was in the range of last week's trades at 109.7, but lower from earlier in the month when the Amgen convertible traded higher in the 111 bid, 112 offered range.

XPO Logistics Inc.'s 4.5% convertibles weren't heard in trade, with two syndicate sources saying that the bonds didn't trade on Monday after the new paper slipped to 99 bid, 100 offered on their debut Friday.

"They haven't traded today," a syndicate source said of the convertibles of the Greenwich, Conn.-based trucking concern, which priced an upsized $125 million of the notes at terms that were mixed compared to talk late Thursday for trade on Friday. XPO shares, which have fallen since the deal was launched, were lower again on Monday.

Goodrich Petroleum Corp.'s 5% convertibles due 2014 traded down 0.25 point outright to 95. The paper was uncharacteristically active after the Houston-based independent oil and gas exploration and production company said a Securities and Exchange Commission investigation into the wells and reserves in the Haynesville shale field have resulted in no action.

Goodrich received a fact-finding subpoena in July requesting information on the natural gas wells and reserves in the Haynesville region, which lies in Louisiana and Texas.

GT Advanced seen cheap

GT Advanced, a provider of solar and LED equipment and services based in New Hampshire, was seen as cheap for investors, using a credit spread of 800 basis points to 850 bps over Libor and a 35% to 38% vol.

Using 800 bps and 35% vol. made the paper 3.6 points cheap at fair value, assuming normal borrow, a Connecticut-based trader said.

Using 850 bps and 38% vol. got the paper about 5 points cheap, a second source said.

But the company's business was seen as a hindrance for investors.

"Quite honestly, this is a sector quite in which people have been burned, and people have lost money," a trader said.

GT Advanced said it plans to price $175 million of five-year convertible notes.

The registered offering has a $26.25 million greenshoe and was being sold via joint bookrunners UBS Investment Bank, Bank of America Merrill Lynch and Credit Suisse Securities (USA) LLC.

RBS Securities Inc. is a joint lead manager, and Santander is a co-manager.

The bonds have contingent conversion if the price of shares is 130% of conversion for 20 out of 30 trading days.

The bonds are non-callable with no puts; and the company is also entering into convertible note hedge and warrant transactions, or a call spread.

Proceeds will be used for general corporate purposes, which may include acquisitions, repayment and refinancing, working capital and capital expenditures.

Merrimack, N.H.-based GT Advanced Technologies is a provider of equipment and services that support the growth of the solar and LED industries.

Suntech Power slips

Suntech Power Holdings' 3% convertible notes due 2013 traded down 0.75 point to 33.5, according to Trace data. The paper had traded up to 35 last week after moving up to 33, from a previous level of about 30 bid, 31 offered, on news a week ago that it was temporarily cutting capacity by about 25% due to oversupply problems and amid preliminary antidumping tariffs in the United States.

Suntech's ADRs on Monday fell 7 cents, or 6.5%, to $1.01 in average trade.

But a convertibles trader said that stock moves for a distressed name such as this one were essentially meaningless.

"Really, the market is totally dead, and it is just in the big, jumbo investment-grade deals that are trading," the trader said.

Last week, the company said it will cut production capacity for solar cells to 1.8 gigawatts from 2.4 gigawatts of annual capacity, or about 25% of output, and about 1,500 employees will be affected.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Goodrich Petroleum Corp. NYSE: GDP

GT Advanced Technologies Inc. Nasdaq: GTAT

Suntech Power Holdings Co. Ltd. NYSE: STP

XPO Logistics Inc. NYSE: XPO

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