Lucent, Ask Jeeves trade near 102 then drop below par; EFI stands strong at 102.5 bid

By Sara Rosenberg

New York, May 30 - There was a lot of secondary activity in the new convertibles that priced by market open Friday, with the most notable names being Lucent Technologies Inc., Ask Jeeves Inc. and Electronics For Imaging Inc. Lucent and Ask Jeeves both experienced trading levels around 102 but later dropped below par, while Electronics For Imaging managed to hold in at above 102 levels.

Lucent Technologies' new convertibles were very active in the secondary on Friday as the new deal was well received by market participants prior to and after pricing Thursday evening, according to market sources. The A tranche traded a little below 102 and the B tranche traded a little above 102 earlier in the day and then both tranches dropped off pretty significantly in response to the stock performance.

The A tranche closed at 98.75 bid, 99.25 offered. The B tranche closed at 99.75 bid, 100.25 offered. The stock closed at $2.21, down $0.05 or 2.21%.

"Generally the deal was fairly well responded to. The bonds were well above par so anyone who wanted to get out of them could have," a market source said.

The Murray Hill, N.J. network provider's deal was so well received that the company priced $1.525 billion convertible senior debt, as opposed to the planned amount of $1.3 billion and price talk was changed during Thursday's session, raising the premium guidance and keeping yield guidance unchanged.

The $750 million tranche A due 2023 priced at par to yield 2.75% with an initial conversion premium of 48%. The $775 million tranche B due 2025 priced at par to yield 2.75% with an initial conversion premium of 38%.

Both were in the middle of revised guidance. The adjusted talk was for a 2.375% to 2.875% yield with an initial conversion premium of 46% to 50% on the tranche A and 2.375% to 2.875% yield with an initial conversion premium of 36% to 40% on the tranche B due in 2025. Originally, the tranche A was expected to have an initial conversion premium of 42% to 46% and the tranche B was expected to have an initial conversion premium of 32% to36%.

Ask Jeeves' new convertible, like Lucent, also traded above 102 on Friday but then headed lower with the stock. The convertible ended the day at around 99 1/8 bid, 99 3/8 offered, according to a trader. The stock closed at $12.75, down 27 cents or 2.07%.

"We've traded a large amount of Ask Jeeves for such a small deal," a market source said.

There was some concern on Thursday that Ask Jeeves' new deal would get lost in the crowd since there were so many larger issues scheduled to hit the market. But according to one source that was not the case since "attractively priced deal don't get lost."

The $100 million five-year convertible subordinated notes priced at par to yield 0% with an initial conversion premium of 30%. Price talk was for a 0% yield, with an initial conversion premium of 24% to 30%.

Credit Suisse First Boston led the Rule 144A deal.

The Emeryville, Calif. provider of web search technologies intends to use the proceeds for general corporate purposes, including potential acquisitions and investments.

Electronics For Imaging's new convertible also traded on Friday, with the deal said to have gone well since "it's an unusual company for the market, so people got involved because of the scarcity issue," a market source said.

The convertible closed at 102.5 bid, 103 offered. The stock closed at $19.87, up $1.31 or 7.06%.

The company priced its $200 million convertible debentures due 2023 at par to yield 1.5% with an initial conversion premium of 42.5%.

UBS Warburg was bookrunner for the Rule 144A deal.

The Foster City, Calif. provider of printing and imaging solutions and services will use $58 million of the proceeds to repurchase 3,135,300 shares from one of the underwriters at $18.54 per share. The company intends to use remaining proceeds for general corporate purposes, possibly including the acquisition of complimentary businesses and technologies or to purchase additional shares.

Sallie Mae's new convertible was seen trading on one desk on Friday for the first time since the deal launched in mid-May. The convertible closed at 98.125 bid, 98.375 offered, unchanged on the day. The stock closed at $120, up $5.00 or 4.35%.

"That was a $2 billion dollar deal. The biggest deal of the month by far," a market professional said. "Even though we didn't underwrite the deal, it's pretty unusual for us to be so quiet in such a large deal. I think our guy traded $15 million bonds, which seems like a lot but remember it's a $2 billion deal."

Sallie Mae's 32-year cash-to-zero floater convertibles were priced earlier this month to yield three-month Libor minus 5 basis points with a 75% initial conversion premium, via joint lead managers JPMorgan, Merrill Lynch & Co. and Morgan Stanley.

Despite Bunge Ltd.'s decision to increase its quarterly cash dividend, the company's convertibles were basically unchanged on the news, although they did experience some trading activity.

The 3.75% convertible due 2022 closed at 114.71 bid, 115.210 offered, up 1.03, according to a trader. The stock closed at $28.90, up 53c or 1.87%.

"They raised the common dividend from 10 cents to 11 cents. That's not too much so it shouldn't really hurt the convertible," the analyst said.

"Most recently management's comments have pointed along the lines that they're pretty confident on the outlook so people are bidding the stock up. This is the second time they've raised the dividend in the past year. It was 9½ cents, then 10 cents and now 11 cents. If the stock goes up because they raised the common dividend then the issue's going to go up," the analyst explained.

Bunge is a White Plains, N.Y. integrated, global agribusiness and food company.

© 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.