Convertibles mostly quiet; Ctrip.com deals slip on swap; Chesapeake Energy issues weak

By Rebecca Melvin

New York, June 22 – U.S convertibles saw follow-on action in the Ctrip.com International Ltd. deals, which debuted in the market on Friday. Ctrip.com shares gained 3% on the day, and both Ctrip.com tranches were said to have come in about 0.125 point on a swap basis.

There was also some trading of Anthem Inc.’s 2.75% convertibles due 2042 in response to the health insurer’s bid for rival Cigna Corp. for $47 billion. Anthem reaffirmed its commitment to the merger after Cigna rejected the offer.

The high-dollar price Anthem bonds traded uninspiringly in line with their underlying shares, which were up 4.7%.

“There was a good amount of volume in anthem,” a New York-based trader said.

Otherwise there was little impact from M&A news on the tape and a stronger equity market, sources said. Convertibles were quiet.

Natural gas was weaker again, and that was taking a toll on Chesapeake Energy Corp.’s convertible bonds and preferred shares, a New York-based trader said.

Chesapeake’s 2.25% convertibles were trading around 88, compared to 92 about a month ago, the trader said.

Chesapeake’s 2.5% convertibles changed hands at 96.25, which was down from a recent level at 97.5.

The Chesapeake 2.5% convertible is shorter-dated than the 2.25% issue and less affected by natural gas prices.

Chesapeake’s 4.5% convertible preferreds were down in the early going by 15 cents at $74.60. Meanwhile, shares of the Oklahoma City-based oil and natural gas company edged up to the unchanged mark early Monday to $11.79, after dropping 2.7% on Friday to notch a fourth straight 52-week low. The shares ended the session fractionally higher.

Surpluses in natural gas have weakened pricing. Natural gas prices initially rose last week but fell at the end of the week. Most recently the Henry Hub benchmark was $2.89/MMBtu, which is up from last week but down compared to $4.70/MMBtu a year ago.

The primary convertible market was quiet during the session, but after the market close two deals were launched for pricing late Tuesday.

NRG Yield Inc. plans to price $250 million of five-year convertible senior notes to yield 3% to 3.5% with an initial conversion premium of 22.5% to 27.5%, and CorEnergy Infrastructure Trust Inc. plans to price $75 million of convertible senior notes to yield 5.75% to 6.25% with an initial conversion premium of 12.5% to 17.5%.

Ctrip deals slip on swap

Both the Ctrip.com 1% convertibles due 2020, or the C tranche, and the 1.99% convertibles due 2025, or the D tranche, were seen trading at 98 on Monday.

Ctrip.com shares rose $2.22, or 3%, to $73.86.

On their debut on Friday, the C bonds were seen at 98.5 at the end of the session after trading at over par at 100.125 early on, and the D tranche was at 98.5 after trading initially at 99.5.

The bonds were flat on issue on Friday.

“Ctrip was more of the focus,” a New York-based sellsider said. But “nothing big was trading.”

The Shanghai-based travel services provider priced an upsized $1.1 billion of the senior notes at the midpoint and cheap end of talked terms.

NRG Yield plans deal

NRG Yield, a Princeton, N.J., generator of renewable and conventional energy, plans to price $250 million of five-year convertible senior notes after the market close on Tuesday that were talked to yield 3% to 3.5% with an initial conversion premium of 22.5% to 27.5%, according to market sources.

The Rule 144A offering has an option for up to an additional $37.5 million of notes.

NRG is also pricing a concurrent offering of 24.52 million shares of common stock for about $600 million.

The notes are non-callable and have dividend protection based on an escalating threshold through maturity.

The notes will be convertible, under certain circumstances, into cash, shares of NRG Yield’s class C common stock or a combination at NRG Yield’s election.

The notes will be guaranteed by NRG Yield LLC and NRG Yield Operating LLC.

Proceeds will be used to repay outstanding debt under the company’s revolving credit facility and debt associated with the company’s Alta X and Alta XI wind facilities. Any remaining proceeds will be used for general corporate purposes, including the acquisition of assets from NRG Energy Inc. or other third parties, although NRG Yield does not currently have any agreements to do so in place.

Joint bookrunning managers are Goldman Sachs & Co., RBC Capital Markets LLC, BofA Merrill Lynch, Barclays, Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC.

Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, KeyBanc Capital Markets Inc. and MUFG will act as co-managers.

CorEnergy to price

CorEnergy, a Kansas City, Mo.-based energy assets investment company, plans to price $75 million of convertible senior notes after the market close Tuesday that were talked to yield 5.75% to 6.25% with an initial conversion premium of 12.5% to 17.5%.

The registered deal has a greenshoe for up to an additional $11.25 million of the unsecured senior notes.

CorEnergy is also pricing 11.25 million shares of common stock with an option to purchase up to an additional 1,687,500 shares.

The bonds are non-callable and have dividend protection above a $0.15 quarterly threshold, compared to $0.135 currently.

Proceeds from the offerings will be used to finance part of its planned $245 million acquisition of the Grand Isle Gathering System, a subsea pipeline system in the Gulf of Mexico, from Energy XXI Ltd.

BofA Merrill Lynch and Wells Fargo Securities are joint bookrunning managers for both offerings.

Mentioned in this article:

Anthem Inc. Nasdaq: ANTM

Chesapeake Energy Corp. NYSE: CHK

CorEnergy Infrastructure Trust Inc. Nasdaq: CORR

Ctrip.com International Ltd. Nasdaq: CTRP

NRG Yield Inc. Nasdaq: NYLD

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