Hawaiian Airlines gains altitude on debut; Kodak adds with higher shares; Quicksilver flat

By Rebecca Melvin

New York, March 18 - Hawaiian Airlines Inc.'s newly priced 5% convertibles traded up strongly Friday to 104 bid, 104.5 offered and looked to be outperforming the underlying shares, although there wasn't a lot of action in the $75 million deal, a market source said.

Syndicate sources would not comment on the deal.

Elsewhere, Eastman Kodak Co.'s convertibles were trading higher on a jump in the underlying shares.

NII Holdings Inc. was trading as well, but that bond has been steady at par, having moved up to that level several weeks ago ahead of the bond's maturity next year.

The NII Holdings paper is strictly a yield-to-maturity name, and there is "nothing left on those," a Connecticut-based sellside trader said.

Cemex SAB de CV's 3.25% and 3.75% convertibles were trading again steady to higher after deteriorating on an outright basis Thursday. The bonds were up a little on a hedged basis, a sellside trader said Friday.

Quicksilver Resources Inc. ended little changed on Friday, after trading slightly higher early in the session. That was following a move lower on an outright basis, but slightly better on hedge Thursday, after word the company won't be taken private by the Darden family.

The past week has brought convertible paper for sale, but not on a lot of volume.

The broader markets reacted negatively Tuesday and Wednesday amid uncertainty surrounding Japan's nuclear crisis and political hotspots in the Middle East.

But by Thursday, equities snapped back, with investors cheered by a combination of progress in stabilizing Japan's damaged nuclear plant and positive U.S. economic data.

On Friday, markets were up again. But volume was thin in the convertible market.

Hawaiian Airlines adds

Hawaiian Airlines' newly priced 5% convertibles traded up to 104 bid 104.5 offered with the underlying shares up just 8 cents.

At the close, shares of the Honolulu-based airline were at $6.16, which was up 5 cents, or 0.8%.

"Airlines and convertibles are wedded at the hip," a New York-based sellside trader said when asked about how market players liked the deal, which priced toward the cheap end of talk for the coupon but beyond the rich end of talk for the premium.

Coupon talk was 4.625% to 5.125%, and premium talk was 22.5% to 27.5%.

The registered offering has an $11.25 million greenshoe and was sold via bookrunner UBS Securities LLC and co-manager Imperial Capital LLC.

The notes are non-callable with no puts. They are provisionally callable prior to Nov. 15, 2015 if the share price is 130% of conversion for at least 20 trading days in a 30-day period.

The notes are will be settled in cash, shares or a combination.

In connection with the notes, Hawaiian Airlines entered into hedge and warrant transactions with the underwriters and affiliates or institutional investors. The strike price of the warrant transactions will initially be $10.00 per share, which puts the initial conversion premium on the notes from the issuer's perspective at about 64%.

A portion of the proceeds will be used to pay the cost of the hedge transactions, with remaining proceeds to repay a portion of the company's existing credit agreement and for general corporate purposes.

Kodak trades up

Kodak's 7% convertibles due 2017 traded higher at 86 with shares higher at $3.21, which were up 18 cents, or 6%, on the day.

Shares of the Rochester, N.Y.-based photography company closed up 24 cents, or 8%, at $3.27 in heavy volume.

The Kodak convertibles, which can trade both an outright and a hedged basis, have been active of late on speculation about what direction the company is heading.

"I don't know how much they trade on swap, but with a 10% yield they can go both ways," a New York-based sellside trader said.

A Connecticut-based sellside trader said: "Management has no credibility; there's supposed to be a turnaround in the business, but it's been six years in turnaround."

Quicksilver ends flat

Quicksilver's 1.875% convertibles due 2024 traded at 107.5 versus a share price of $14.10 on Friday and also at 106.5, compared to 107 on a slightly lower share price on Thursday.

The bonds were active both days after Quicksilver and the members of the Darden family announced early Thursday that they had determined not to pursue further a take-private transaction of Quicksilver Resources at this time.

The Darden family first announced that they were interested in a take-private transaction in October.

On Thursday, a late trade went up at 106.86 versus a share price of $14.08 on a 40% delta, which is a little better than they had been.

"Moving that trade around one needs $17.85 to the upside to break even and $11.40 to cross par to the downside. The Sept. 17 calls went out 0.50 to 0.0600 and the 12 puts went out 0.65 to 0.85," a new York-based sellside trader said.

Shares of the Fort Worth, Texas-based natural gas producer Friday settled little changed after rising intraday. They ended up 6 cents, or 0.4%, to $14.13, following a 3.6% drop on Thursday.

Mentioned in this article:

Cemex SAB de CV NYSE: ADS: CX

Eastman Kodak Co. NYSE: EK

NII Holdings Inc. Nasdaq: NIHD

Hawaiian Airlines Inc. Nasdaq: HA

Quicksilver Resources Inc. NYSE: KWK

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