By Ronda Fears
Nashville, April 22 - Pride International Inc. sold $250 million of 30-year convertible senior unsecured notes at par with a 3.25% coupon and record 80% initial conversion premium in an overnight Rule 144A deal, via lead manager Morgan Stanley.
The convertible traded in the gray market before the open slightly below par, by about 0.25 point, traders said, but was closed Wednesday by the underwriter at 101.75 bid, 102 offered.
Pride shares ended up 28c, or 2%, to $14.56, which one salesman said indicated that the deal had a great deal of support and interest.
It was not re-priced at a discount to buyers - something the market was closely watching since at least four other deals of late have been re-priced by the underwriters, which essentially just eats into their banking fees, amid something of a buyers revolt against onerous terms.
The Pride deal was sold at a record conversion premium, hit previously by Hilton Hotels Corp. at 73%, if recent deals with warrant kickers and the like are excluded.
It also sold at the cheap end of guidance for the coupon, which some outright buyside sources said was a stipulation in their orders. Talk for the deal was 2.75% to 3.25% for the yield and 80% for the conversion premium.
Sellside analysts put the new Pride convertible right at about fair value.
Wachovia Securities, Inc. put it 0.13% cheap, using a credit spread of 325 basis points over Treasuries and a 38.9% stock volatility.
Lehman Brothers put it 0.23% cheap, using a credit spread of 350 bps over Treasuries and a 40% stock volatility.
Bear Stearns & Co. put it 0.4% cheap, using a credit spread of 260 bps over Treasuries and a 40% stock volatility.
Merrill Lynch & Co. put it 0.1% cheap, using a credit spread of 390 bps over Treasuries and a 40% stock volatility.
Deutsche Bank Securities Inc. put it 0.37% rich, using a credit spread of 300 bps over Libor and a 38% stock volatility.
Pride said proceeds would be used to repay debt, which many convertible market participants believe will be the upcoming put on the 0% due 2018 - an estimated $113 million cash obligation - on Thursday.
Terms of the deal are:
Issuer: Pride International Inc.
| Issue: | Convertible senior notes
|
| Joint lead manager: | Morgan Stanley
|
| Amount | $250 million
|
| Greenshoe: | $50 million
|
| Maturity: | May 1, 2033
|
| Coupon: | 3.25%
|
| Price: | Par
|
| Yield: | 3.25%
|
| Conversion premium: | 80%
|
| Conversion price: | $25.704
|
| Conversion ratio: | 38.9045
|
| Call: | Non-callable for 5 years
|
| Put: | In years 5, 7, 10, 15, 20 and 25
|
| Contingent conversion: | 120%
|
| Contingent payment: | 120%
|
| Ratings: | S&P: BB
|
| Settlement: | April 28
|
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