New Wright Medical gains; Wright Medical’s 2020 convertible lower; Nvidia jumps in line

By Rebecca Melvin

New York, May 13 – Wright Medical Group NV’s newly priced 2.25% convertibles traded higher on Friday after the new issue of $395 million of 5.5-year convertible senior notes was released for secondary market dealings, a New York-based trader said.

The new issue, which was a private placement and exchange, was seen trading in the 102.25 to 103 context against shares at $17.35, a New York-based trader said early Friday. Shares were lower at that time, trading down some 2.2% to $17.41. The stock ended unchanged on the day at $17.80.

The new deal was priced concurrently with exchanges of about of $54.4 million of the company’s existing 2017 notes and $45 million of its 2020 notes.

The initial conversion premium of the new bond was 20% over the closing share price of the shares on Thursday, but there is a call spread in connection with the pricing of the notes, which boosted the initial conversion premium from the issuer’s perspective to 69%.

J. Wood Capital Advisors LLC was the private placement agent.

The older Wright Medical 2% convertibles due 2020 were bouncing around in active trade, and were last seen at 93.7. That was up from earlier trades of about 92.4 to 92.75 but lower compared to 94.8 previously.

The other issue, Wright Medical 2% convertibles due 2017, has barely anything left outstanding and were not seen to have traded on Friday.

Elsewhere, Nvidia Corp.’s shares traded at all-time highs after the Santa Clara, Calif.-based company’s gaming revenue jumped 17% year over year, a New York-based trader noted. The Nvidia 1% convertibles due 2018 surged more than 20 points to more than double par as shares popped 15%.

SanDisk Corp.’s bonds traded after news that its planned merger with Western Digital Corp. was completed. Under the terms of the transaction, each outstanding share of SanDisk common stock was converted into the right to receive $67.50 per share in cash and 0.2387 of a share of Western Digital common stock.

SanDisk’s 0.5% convertibles due 2020 traded actively but little changed at 104.25 bid, 104.50 offered, according to Trace data.

SanDisk’s 1.5% convertibles due 2017 traded lightly, ending the day slightly lower at 156.93.

Qihoo 360 Technology Co. Ltd. remained in trade although not nearly as actively as earlier in the week. The bonds retraced gains however as the expectation is that the deal for the U.S.-listed Chinese PC and mobile internet security company to repatriate to China will get done.

Qihoo’s stock and bonds have been volatile all week amid speculation regarding whether China’s regulators will allow its long-planned buyout by a consortium of investors including the company’s chief executive officer to be completed. Prices have come off when speculation is high that the deal may be nixed, and prices move back up when it looks more likely that the deal will be allowed to go through.

Under the terms of the Qihoo notes, holders can put the convertibles if there is a fundamental change such as the buyout deal.

The Qihoo 1.75% convertibles due 2021 traded up a point of more to 96 during the session from about 94.5 on Thursday, according to Trace data.

Qihoo’s 0.5% convertibles due 2020 traded up to 98 from 96.5.

The Qihoo 2.5% convertibles due 2018 were up to 99.35 from 98.625.

Qihoo shares added back $2.50, or 3.7%, to $70.45 in heavier-than-average volume.

In the broader markets, equities were lower on the week with the S&P 500 stock index trading down on Friday by 17.5 points, or 0.9%, to 2,046.61, the Dow Jones industrial average slid another 185.18 points, or 1%, to 17,535.32, and the Nasdaq stock index shed 19.66 points, or 0.4%, to 4,717.68.

Wright Medical new deal gains

Wright Medical’s 2.25% convertibles due 2021 traded up to 102.5 to 103 in the early going on Friday even though shares were lower. Wright Medical shares were off about 2.5% in the early going but pared losses and were unchanged at the end of the day.

Concurrently with the sale of the new notes, some investors of the company’s existing 2% cash convertible senior note due 2017 and the existing 2% convertible senior notes due 2020 entered into privately negotiated exchange agreements. The company will not receive cash proceeds from the exchanges, which amounted to about $54.4 million of the 2017 notes and about $45 million of the 2020 notes.

There is $5.625 million remaining outstanding in the 2017 bond issue and $587.5 million remaining in the 2020 bonds.

The new bonds are non-callable with no puts. They have contingent conversion if shares exceed 130% of the conversion price or if the bonds trade at 98% of parity.

Also in connection with the new issue, the company entered into convertible note hedge and warrant transactions with some counterparties. The initial strike on the warrants is $30.00 per share, which has the effect of boosting the initial conversion premium from the issuer’s perspective to about 69%.

Proceeds of the new issuance will be about $286.5 million, and about $45.2 million of that will be used to pay for the net cost of the call spread, with remaining proceeds for general corporate purposes.

Mentioned in this article:

Nvidia Corp. Nasdaq: NVDA

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

SanDisk Corp. Nasdaq: SNDK

Wright Medical Group NV Nasdaq: WMGI

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