AOL sees strong debut; planned Priceline seen rich; existing Priceline under pressure

By Rebecca Melvin

New York, Aug. 14 – AOL Inc.’s newly priced 0.75% convertibles jumped out of the chute Thursday and remained strong throughout the session even though the underlying shares pulled back some in afternoon trading.

The new AOL bonds were seen at about 103.5 at the close and were better on a dollar-neutral, or hedged, basis by 3 points, market sources said.

AOL’s strong performance contrasted with expectations for Priceline Group Inc.’s planned offering of up to $1 billion of seven-year convertible senior notes, which was seen pricing after the market close.

The new Priceline deal was talked to price at a discount to par of 99 to 99.25, and one source thought pricing would have to come at an even lower level.

In the gray market ahead of final terms being fixed, the planned Priceline deal traded at 99.75, and they were later seen at 98.25 bid, 99 offered in the gray market.

The planned Priceline deal was putting pressure on Priceline’s existing convertibles, which were seen to have contracted on hedge by about a point on Wednesday and by another 2 points on Thursday.

Fellow travel-services provider Ctrip.com International Ltd. of Shanghai saw its 1.25% convertibles trade in size at the market close, at 113.0625 versus a share price of $66.35, a New York-based trader said. Shares of the China travel site were off about 50 cents, or 0.8%.

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