Nuance, ON enter market; Dish’s new deal does well post-pricing; Intel slips on Mobileye buy

By Stephanie N. Rotondo

Seattle, March 13 – The threat of a blizzard in the Northeast was keeping convertible bond market dealings at bay, a trader said Monday.

“The trains were empty this morning,” he commented.

New York, along with Boston and other cities located on or near the northeastern coast, are under a blizzard warning, as forecasters predict that up to two feet of snow could get dumped on the region.

The market was also sitting back ahead of the upcoming Federal Open Market Committee meeting. The Federal Reserve committee is expected to announce on Wednesday whether or not interest rates will be increased this month.

Expectations are that a hike is very likely. Still, how much the increase will be is still a question, as is whether or not more increases are ahead.

While the day’s overall volume was limited, that did not stop the pipeline from filling up.

Early in the day, Nuance Communications Inc. announced a $350 million offering of convertible notes due 2025.

One sellside source said the deal was being talked at 1% with an initial conversion premium of 32.5%.

“The bonds modeled slightly rich” at 99, the source said.

“And convert guys will line up to overpay,” another sellsider commented.

Ahead of pricing, the company’s shares were up 18 cents, or 1.06%, at $17.09.

The Burlington, Mass.-based provider of voice and language solutions for businesses and consumers plans to use proceeds from the deal to buy back its 2.75% convertible notes due 2031, which become putable on Nov. 1, 2017.

After the market closed, ON Semiconductor Corp. said it was planning to sell $500 million of convertible senior notes due 2023.

The deal is being talked with a 0.75% to 1.25% yield and an initial conversion premium of 35% to 40%.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, Deutsche Bank Securities Inc., BMO Capital Markets and HSBC are running the books.

Proceeds will be used to repay a portion of the company’s outstanding indebtedness under a term loan B facility and to pay related transaction fees and expenses.

“The offering of the notes is expected to mitigate ON Semiconductor’s interest rate exposure by replacing floating-rate debt with fixed-rate debt and lowering its cash interest expense,” the Phoenix-based company said in its press release.

ON’s stock finished the day at $15.31, up 9 cents.

Of the deals that did price, Dish Network Corp.’s new $1 billion of 2.375% convertible notes due 2024 – a deal priced Friday with a 32.5% initial conversion premium – were dominating trading, according to a trader.

“They are trading a lot,” he said, seeing the issue at 100.25.

As for the underlying stock, it was down 7 cents at $61.98.

The yield came at the cheap end of the 1.875% to 2.375% talk and in the mid-range of the 30% to 35% conversion premium talk.

Deutsche Bank Securities Inc. ran the books on the Section 4(a)(2) private placement.

Dish’s 3.375% convertible notes due 2026 were meantime active as well, continuing to trade with a 119 handle.

The convertible bonds are non-callable for life. The issue is convertible under certain circumstances and during certain periods. Conversions will be settled in cash, class A common stock, or a combination of the two, at the company’s option.

The initial conversion rate is 12.1630 shares per each $1,000 of notes, equal to an initial conversion price of $82.22.

Proceeds will be used for strategic transactions, which may include wireless and spectrum-related transactions and other general corporate purposes.

Dish is an Englewood, Colo.-based satellite TV provider.

Intel wavers

Away from new issues, Intel Corp.’s 2.95% convertible notes due 2035 were trading actively and were “down with the stock,” a trader said.

He placed the bonds at 133.5.

Another market source also pegged the paper at 133.5, down a deuce.

The company’s shares were also under pressure, declining 75 cents, or 2.09% to $35.16.

Intel was losing ground after it was announced that the company was acquiring Israeli self-driving car technology manufacturer Mobileye for $15.3 billion.

The total price is equal to $63.54 a share, representing a 33% premium to Mobileye’s closing price of $47.00 on Friday.

However, analysts have expressed concerns about the acquisition, given that the purchase price represents a premium of about 60 times Mobileye’s earnings. There are also concerns about Intel stepping outside of its core business.

Jefferies, for one, downgraded Intel’s equity to “hold” in the wake of the news.

Mentioned in this article:

Dish Network Corp. Nasdaq: DISH

Intel Corp. Nasdaq: INTC

Nuance Communications Inc. Nasdaq: NUAN

ON Semiconductor Corp. Nasdaq: ON

© 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.