UTi Worldwide to price $350 million deal after the close; Tesla launches $1.6 billion deal

By Rebecca Melvin

New York, Feb. 26 - Market players eyed UTi Worldwide Inc.'s planned $350 million of five-year convertible notes, launched ahead of the market open Wednesday, and readied for a second launch expected after the market close, which turned out to be Tesla Motors Inc.'s $1.6 billion of convertible senior notes in two tranches.

The two deals broke a dry spell for new issuance in convertibles that persisted for the better part of two weeks. The single exception was American Energy Partners LP's deal last week, which was a pre-initial public offering convertible.

The UTi Worldwide convertibles, which were expected to price after the market close on Wednesday, were seen typically cheap. But the underlying shares of the freight and logistic company plunged an uncharacteristic 30% after the deal was announced as part of a critical refinancing package.

Tesla's convertibles were seen pricing after the market close on Thursday, and the underlying shares were unaffected by the convertible deal since it was announced after the market close Wednesday. Even so, the shares have been on a tear of late, adding a 2% gain to a 14% gain on Tuesday and settling Wednesday at $253.00.

The Tesla shares weren't expected to be overly affected by the new offering.

Elsewhere, Tesla's existing 1.5% convertibles due 2018 extended outright gains to about 213 against another gain in the underlying shares to $253.00 by the close. That compared to 205.375 versus an underlying share price of $247.00 on Tuesday.

Advanced Micro Devices Inc.'s 6% convertibles due 2015 were active and steady amid a tender offer for a big chunk of that issue on the heels of financing notched last week in the form of straight bonds.

Meanwhile Navistar International Corp.'s 3% convertibles due 2014 were in trade Wednesday and ended the session around 100.875 bid, 101.125 offered, a New York-based trader said.

DryShips Inc. was also a name in the market. That issue has been moving up on odd lots over the past couple of days.

UTi Worldwide looks cheap

Using a credit spread of 750 basis points over Libor and 25% vol., the new UTi convertible deal looked 1.8% cheap at the midpoint of talk, which is for a 4.75% coupon and a 32.5% premium, a Connecticut-based trader said.

The Rule 144A offering has a $50 million greenshoe and was being sold via Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC.

Proceeds will be used for general corporate purposes, including repayment of debt.

But there was other information to digest surrounding this new deal as it is part of a refinancing plan unveiled Wednesday to address the company's current liquidity crunch.

UTi said that its financial problems stem from "the effects of a lackluster global economy along with difficult operating conditions."

The company is not in compliance with certain financial covenants associated with its $200 million of senior unsecured guaranteed notes due 2013 and its global credit facilities. In addition, the company's South African facilities agreement and other letters of credit and guarantee facilities have cross-default provisions that could be triggered by covenant violations of the 2013 senior notes and global credit facilities.

The company has obtained waivers for the 2013 senior notes and its global credit facilities that are good through April 15, but at that point, about $400 million of debt becomes due.

Without the new financing, the company's ability to continue as a going concern would be in doubt, the company said. But it believes that assuming the financing plan is completed and absent some new developments or discoveries, its 2014 fiscal year financial statements would not refer to a going-concern qualification.

UTi Worldwide is an ocean freight and logistics company based in Road Town, the British Virgin Islands.

Tesla to price $1.6 billion

Tesla's $1.6 billion of convertible senior notes in two tranches includes $800 million of notes due 2019 and $800 million of notes due 2021.

The tranche of five-year notes was seen pricing with a 0.25% to 0.75% coupon, and the tranche of seven-year notes was seen pricing with a 1.25% to 1.75% coupon.

Both tranches will have an initial conversion premium of 37.5% to 42.5% and will have an over-allotment option for up to an additional $120 million of notes each.

Holders may convert their notes if shares rise to at least 130% of the conversion price. The notes are non-callable with no puts except a fundamental change-of-control put.

Goldman Sachs & Co., Morgan Stanley, J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. are joint bookrunners of the registered deal.

Proceeds will be used to accelerate growth of its business in the United States and internationally, for development and production of a mass market vehicle, the development of the Tesla Gigafactory and other general corporate purposes, and also to pay the net cost of the convertible note hedge transactions.

Pending those uses, the company plans to invest proceeds in highly liquid cash equivalents or U.S. government securities.

Based in Palo Alto, Calif., Tesla makes and sells electric vehicles and electric vehicle powertrain components.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

DryShips Inc. Nasdaq: DRYS

Navistar International Corp. NYSE: NAV

Tesla Motors Inc. Nasdaq: TSLA

UTi Worldwide Inc. Nasdaq: WTIW

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