Golar LNG’s new issue trades over par post-pricing; OSI Systems in the market; Microchip eyed

By Stephanie N. Rotondo

Seattle, Feb. 14 – The convertible bond market had a new issue hit the tape on Tuesday as Golar LNG Ltd. priced $350 million of five-year convertible senior notes.

The issue came with a 2.75% yield and an initial conversion premium of 35%. The terms were in the middle of the 2.5% to 3% yield talk, as well as the 32.5% to 37.5% premium talk.

ABG Sundal Collier, BofA Merrill Lynch, Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC ran the books.

Investors seemed to like the new deal, according to a trader. The convertibles ticked up to 102.375 to 102.75 toward the end of the day, he said.

The trader saw the convertibles in a 102 to 102.25 range in early dealings.

“There hasn’t been much” in terms of new issues in the last few weeks, he noted.

The company’s shares rebounded from early lows, closing up 11 cents to $28.03.

Looking ahead, OSI Systems Inc. said after the market closed that it was selling $225 million of convertible senior notes due Sept. 1, 2022.

Price talk is for a yield of 1.125% to 1.625% and a conversion premium of 35% to 40%. Pricing is expected after Wednesday’s close.

Aside from Golar, the market continued to push around Microchip Technology Inc.’s 1.625% convertible notes due 2027, a $1.8 billion issue that priced Friday.

The company also sold $500 million of 2.25% convertible notes due 2037, but the 1.625% paper has received the bulk of the attention.

A trader saw the 1.625% convertibles in a 100.125 to 100.25 context, which he said was “in like a quarter-point, no big deal.”

Another market source said the paper continued to straddle par, while the 2.25% convertibles were little changed around 100.5.

Microchip’s equity was rebounding from Monday’s lows, trading up 12 cents to $70.78.

Golar deal terms

Golar LNG brought $350 million of 2.75% convertible senior notes due 2022, with an initial conversion premium of 35% on Tuesday.

The deal priced at the midline of 2.5% to 3% yield talk and a conversion premium of 32.5% to 37.5%.

There is a $52.5 million over-allotment option.

Conversions will be settled in cash, common stock or a combination of the two, at the company’s option. The conversion rate is 26.5308 shares per each $1,000 of notes, equaling a conversion price of $37.69.

The convertibles will not be callable or putable. However, the company will have the option of redeeming the issue, but only if 90% of the principal amount has been converted.

Aside from the capped calls, proceeds will be used for general corporate purposes.

Golar is a Hamilton, Bermuda-based liquefied natural gas shipping company.

OSI on tap

OSI Systems announced plans for its first convertible debt issue, a $225 million Rule 144A offering of convertible senior notes due 2022.

BofA Merrill Lynch, Wells Fargo Securities LLC, J.P. Morgan Securities LLC and Jefferies are leading the deal.

An investor call is scheduled for Wednesday, with pricing expected after the midweek session ends.

Ahead of the announcement, OSI’s stock traded up 35 cents to $76.73.

There is a $33.75 million over-allotment option.

Conversions will be settled with cash, common stock, or a combination, at the company’s option.

The notes are callable on or after March 6, 2020, but only if the stock price hits a 130% price hurdle.

Proceeds will be used to repay borrowings under a credit facility, to repurchase up to $50 million shares of common stock from buyers of the new convertibles and for general corporate purposes.

OSI is a Hawthorne, Calif.-based vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications in the homeland security, health care, defense and aerospace industries.

Hologic lower

Hologic Inc.’s convertible bonds waned, along with its stock, after the company said it was acquiring Cynosure Inc. for $1.65 billion.

A market source saw the 2% convertible notes due 2042 in a 131.375 to 131.5 context, down about 5 points outright.

The 0% convertible notes due 2043 were meantime off about half a point, trading just south of 121.5.

The common stock declined 99 cents, or 2.47%, to $39.03.

The company said it is able to fund the transaction because it recently sold its blood screening business for $1.85 billion.

In addition to the acquisition, Hologic said it is also considering retiring its outstanding convertibles.

“[This acquisition] provides compelling financial benefits,” chairman, president and chief executive officer Stephen P. MacMillan said on a conference call announcing the asset purchase.

Cynosure is a Westford, Mass.-based manufacturer of fat-melting and skin-clearing lasers. In taking over the company, Hologic, a Bedford, Mass.-based developer and manufacturer of products focused on breast health and gynecological surgical instruments, will effectively enter the aesthetic market.

Mentioned in this article:

Golar LNG Ltd. Nasdaq: GLNG

Hologic Inc. Nasdaq: HOLX

Microchip Technology Inc. Nasdaq: MCHP

OSI Systems Inc. Nasdaq: OSIS

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