Clearwire collapses outright, flat to lower dollar neutral; JinkoSolar sells $125 million

By Rebecca Melvin

New York, May 12 - Clearwire Corp. was a focus of the convertible bond market Thursday, with the paper dropping 6 or 7 points outright but flat to only slightly lower on a dollar-neutral basis after Intel Corp. announced that it is selling about 10 million shares of the Kirkland, Wash.-based wireless broadband services provider.

Life Technologies Corp.'s 3.25% convertibles due 2025 were little changed after the Carlsbad, Calif.-based life sciences company announced a call of the 3.25% convertibles, of which there was $350 million outstanding as of Wednesday.

"There was very little premium in this bond because the call was widely expected," a New York-based sellside analyst said of the call.

Life's 1.5% convertibles due 2024 were also trading actively and were seen at 118.75 bid, 119.125 offered at the end of the session, which looked to be down slightly outright.

Elsewhere, Cemex SAB de CV was said to be trading, and Morgans Hotel Group Co. was mentioned in trade at 89 on no particular news with Morgans' underlying shares rebounding slightly along with the broader equities markets.

In the primary market, JinkoSolar Holding Co. Ltd. priced $125 million 4% convertible notes due 2016 after the market close Wednesday at the midpoint of talk for the coupon and at the cheap end of premium talk. Those notes were not heard in trade on Thursday, but the underlying shares rose 86 cents, or 3%, to $28.41.

Clearwire neutral to lower

Clearwire's 8.25% convertibles due 2040 traded at 95.5 versus an underlying share price of $4.20 on Thursday. That compares to a week ago on May 5 when the paper was at 103 versus a share price of $4.90 and two weeks ago on April 27 when it was at 107.75 versus a share price of $5.15.

On the day, the 8.25% convertibles were down from about 101, or 6 or 7 points.

Shares fell 74 cents, or 16%, to $3.99 after it was announced late Wednesday that Intel would sell up to 10 million shares of Clearwire.

The convertibles were 94 bid, 95 offered. But they were "roughly neutral to down a little bit" on a hedged basis depending on the delta.

"A lot of guys own them outright," a New York-based sellside trader said.

It all depended on what delta they were held on and the conventional delta would have been 75%ish. But really it was all over the map because there are so many moving parts to this story and so many views on Clearwire's prospects.

"It's hard to say what the theoretical delta was since there is a wide range of views out there," the trader said.

Santa Clara, Calif.-based Intel, which had owned about 102.4 million shares of the company, according to a filing, said that in rebalancing its equity portfolio and to realize certain tax benefits, it was selling the Clearwire stake.

The sale, however, does not affect any contractual obligations or business arrangements between Intel and Clearwire.

Earlier this week Intel announced a 16% dividend increase and Moody's Investors Service said that the dividend increase will not affect the company's A1 long-term and Prime-1 short-term debt ratings or stable outlook.

Life little changed

Life's 3.25% convertibles due 2025, which are being called, were seen at the close at 114.675 bid, which was little changed from the previous level.

"It had been trading at only a slight premium of 0.7%. People largely expected that the company would do this because it said it was going to buy back debt and reduce leverage," a New York-based sellside analyst said.

"We have them marked at the close of parity plus, or minus, 0.25 point," the analyst said.

Life's 1.5% convertibles due 2024 were also trading actively, and they were seen little changed to slightly lower at the close.

Life shares ended the session up 47 cents, or 0.8%, at $56.35 on Thursday.

The 2025 convertible notes are convertible at any time prior to 5 p.m. ET on June 14 at a rate of 20.356 shares of common stock per $1,000 principal amount of the notes surrendered. The notes surrendered for conversion will be settled in cash and stock in accordance with the indenture provisions.

JinkoSolar prices

Shangrao, China-based solar product manufacturer JinkoSolar priced $125 million of five-year convertibles to yield 4% with an initial conversion premium of 22.5%, according to a release.

The notes, which were distributed via Rule 144A, will be convertible into American Depositary Shares of the company at an initial conversion price of about $33.75.

The notes are non-callable with no puts.

JinkoSolar entered into a capped call transaction with an affiliate of an initial purchaser, which boosts the initial conversion premium from the issuer's perspective to about 75%.

A portion of the proceeds will be used to pay for the capped call. Remaining proceeds will be used for expansion of the company's silicon wafer and solar cell and solar module production capacity.

Mentioned in this article:

Cemex SAB de CV NYSE: CX

Clearwire Corp. Nasdaq: CLWR

Life Technologies Corp. Nasdaq: LIFE

Morgans Hotel Group Co. Nasdaq: MHGC

JinkoSolar Holding Co. Ltd. NYSE: ADS: JKS

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