New Mountain taps 5.75% notes; Cypress Semiconductor in focus; ON Semiconductors better

By Abigail W. Adams

Portland, Me., June 3 – While the convertibles primary market remained largely quiet on Monday, one add-on offering was on deck.

In a deal set to price shortly after it was announced, New Mountain Finance Corp. plans to price a $50 million add-on to its 5.75% convertible notes due 2023 after the market close on Monday with a reoffer price of 100.75 to 101.25, according to a market source.

Morgan Stanley & Co. LLC and Wells Fargo Securities LLC are joint bookrunners for the registered offering, which carries a greenshoe of $7.5 million.

The add-on will be immediately fungible with and carry the same terms as the outstanding $115 million 5.75% convertible notes initially issued in August 2018.

Meanwhile, the secondary space was active as equities wavered between gains and losses.

There was $107 million in reported volume a little more than one hour into Monday’s session and $431 million in reported volume by the late afternoon, sources said.

Cypress Semiconductor Corp.’s convertible bonds were in focus as stock skyrocketed on news of a buyout.

While the notes made large gains on an outright basis, they were flat to slightly improved dollar-neutral, sources said.

Despite the large premium involved in Cypress Semiconductor’s buyout offer, there was only minimal improvement in the convertible notes of the semiconductor sector, which some sources found surprising.

ON Semiconductor Corp.’s 1% convertible notes due 2020 were among the convertible notes that were active but only slightly improved dollar-neutral.

Teva Pharmaceutical Industries Ltd.’s 0.25% convertible notes due 2026 were also active with the notes recouping some of their losses after trading down last week.

Cypress buyout eyed

Cypress Semiconductor’s convertible notes were in focus in the secondary space after news broke that Germany-based Infineon Technologies AG would acquire the company in a deal valued at $10 billion.

The semiconductor company’s 4.5% convertible notes due 2022 were the most actively traded issue in the secondary space with more than $45 million in reported volume by the late afternoon.

The notes rose more than 20 points outright.

They were seen changing hands just north of 166.25 versus an equity price of $22.02.

The notes were trading just over parity, a market source said.

With a 75% delta, the notes improved about 0.75 point dollar-neutral, another source said.

Cypress’ 2% convertible notes due 2023 were also active with the notes gaining about 8 points outright.

They were seen changing hands just under 117.75 versus an equity price of $22.05, according to a market source.

However, the notes were largely flat on a dollar-neutral basis, a market source said. About $20 million of the bonds were on the tape by the late afternoon.

Cypress Semiconductor’s stock closed Monday at $22.07, an increase of 23.85%.

Stock was up more than 50% since takeover speculation began to circulate the market last week, a source said.

Germany-based Infineon Technologies AG announced prior to the market open that it will acquire Cypress Semiconductor in a bid to fuel growth in the automotive, industrial and internet of things sectors.

The deal involves a cash offer of $23.85 per share and includes debt.

The semiconductor sector

Despite the large premium involved in Infineon Technologies takeover bid for Cypress Semiconductors, the semiconductor sector was largely unmoved by the news, which was a surprise to some sources.

ON Semiconductor’s 1% convertible notes due 2020 were active on Monday with the notes slightly improved on an outright and dollar-neutral basis.

The 1% notes were up about 1 point outright. They were seen changing hands just north of 115.125 versus a stock price of $18.09 in the late afternoon.

They were improved about 0.25 point dollar-neutral, a market source said.

More than $10.5 million of the bonds were on the tape during Monday’s session.

ON Semiconductor’s stock closed the day at $18.08, an increase of 1.8%.

While up slightly, some sources were surprised to not see it move more. Given the large premium involved in Cypress’ takeover bid, some expected the convertible notes of semiconductor companies with strong takeover protection to have seen greater gains.

“I would have thought you’d see better buyers,” a market source said.

Teva active

Teva’s 0.25% convertible notes due 2026 were among the volume movers during Monday’s session with the notes making slight gains after trading down the previous week.

The notes were up about 0.375 point outright. They were changing hands at 90.375 in the late afternoon versus a stock price of $8.91, according to a market source.

More than $17 million of the bonds were on the tape by the late afternoon, making it one of the most active issues in the secondary space.

Teva stock closed Monday at $8.90, an increase of 2.89%.

After steadily trading down last week, stock was on the rise following an upgrade from analysts from Oppenheimer Holdings Inc. and CIBC.

Both firms raised the stock to “outperform” from “market perform” and set the price target at $12.00.

Teva’s stocks and bonds were under pressure last week after the generic drug maker reached a settlement with the state of Oklahoma for its role in the opioid epidemic.

Some analysts speculated Teva’s liabilities in relation to opioids could reach $1 billion.

Mentioned in this article:

Cypress Semiconductor Corp. Nasdaq: CY

New Mountain Finance Corp. NYSE: NMFC

ON Semiconductor Corp. Nasdaq: ON

Teva Pharmaceutical Industries Ltd. NYSE: TEVA

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