Square deal comes upsized, jumps over par; Silicon prices; Viavi still busy; Ashford on tap

By Stephanie N. Rotondo

Seattle, March 1 – It was another new issue day for the convertible bond market on Wednesday.

Square Inc. priced $400 million of 0.375% convertible senior notes due 2022 before the market opened.

The deal came with an initial conversion premium of 32.5%, which was at the mid-line of talk. Yield came rich to the 0.375% to 0.875% talk.

The deal was also upsized from $350 million.

Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC ran the books.

One sellside source said the new convertibles traded as high as 103.75 outright, calling that up about 2.5 points on swap.

Another market source pegged the issue around 103.

The company’s stock fared well initially, but eventually ended lower, declining a dime to $17.22.

Square announced early Wednesday that it had acquired OrderAhead, a dining pickup website and app that will expand the company’s Caviar business.

Meanwhile, Silicon Laboratories Inc. said late Tuesday that it had sold $350 million of 1.375% convertible senior notes due 2022, with an initial conversion premium of 37.5%.

The deal came in the middle of the 1.25% to 1.75% yield talk and on the rich end of the 32.5% to 37.5% premium talk.

Goldman Sachs and Wells Fargo Securities LLC were the bookrunners.

A trader said the bonds were trading as high as 102.75 in early dealings.

As for the underlying equity, it was better, adding $1.65, or 2.44%, to close at $69.15.

From early Tuesday business, Viavi Solutions Inc.’s $400 million of 1% convertible senior notes due 2024 continued to be in play.

A source said the paper traded at 101.375 versus a stock price of $10.10.

The terms came rich to the initial price talk of 0.5% to 1%, but cheap to the premium talk of 32.5% to 37.5%.

JPMorgan, Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC led the deal.

As for the secondary, Palo Alto Networks Inc.’s 0% convertible notes due 2019 took a massive hit after the company reported disappointing results.

The company’s stock didn’t do too well either, dropping more than 24% during the session.

Palo Alto plunges

Palo Alto Networks’ 0% convertibles got hammered on Wednesday, following the company’s after-hours earnings release on Tuesday.

One market source said the convertibles ended at 121.25, which compared to levels closer to 125 at the open. Another source said the paper dove 25 points to 120.

The company’s equity took a serious hit as well, falling $36.69, or 24.15%, to $115.21.

On an adjusted basis, Palo Alto reported earnings of 63 cents per share – a penny better than analysts’ expectations of 62 cents per share.

However, revenue of $422.6 million missed expectations of $430 million.

Guidance for the current quarter was not taken well either.

The company said it expects to see adjusted earnings of 54 cents to 56 cents, on revenue of $406 million to $416 million.

Analysts were forecasting adjusted EPS of 70 cents on revenue of $455 million.

In its conference call, company management said that its weaker results were due to the execution of a sales strategy that, while profitable in the past, has seemed to lose its effectiveness.

“We have had very good results with this playbook for some time and continued with it in our fiscal 2017 planning,” explained Mark McLaughlin, chief executive officer, in the call. “This appears to have been too much too fast as we changed the coverage model for many customer relationships resulting in lower productivity and less accuracy in forecasting.”

Palo Alto Networks is a Santa Clara, Calif.-based network and enterprise securities company.

Ashford to price add-on

Ashford Hospitality Prime Inc. announced plans to sell an additional $28.75 million of its 5.5% series B convertible preferred shares (NYSE: AHPPrB).

The convertible preferreds traded at $21.80. Its common stock dipped 15 cents, or 1.15%, to $12.90.

Concurrently with the preferred offering, Ashford is also selling 5.75 million shares of common stock.

The Dallas-based real estate investment trust said it would use proceeds for general corporate purposes, including funding potential acquisitions.

On Wednesday, Ashford said it had inked a deal to buy Hotel Yountville in Yountville, Calif., for $96.5 million. Additionally, it has signed a non-binding letter of intent to buy a luxury hotel for $150 million.

Mentioned in this article:

Ashford Hospitality Prime Inc. NYSE: AHP

Palo Alto Networks Inc. NYSE: PANW

Silicon Laboratories Inc. Nasdaq: SLAB

Square Inc. NYSE: SQ

Viavi Solutions Inc. Nasdaq: VIAV

© 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.