RPM gains outright on debut; planned GT Advanced deal talk tightened; existing GT in line

By Rebecca Melvin

New York, Dec. 4 - RPM International Inc.'s newly priced 2.25% convertible senior notes traded up more than 3 points on an outright basis in active trade Wednesday after the Medina, Ohio-based maker of specialty chemical products priced $200 million of the seven-year notes at the rich end and beyond the rich end of talk.

The new RPM convertibles ended the session up at about 103.625 bid, 104.375 offered, a syndicate source said, with the stock closing up 56 cents, or 1.5%, at $39.20.

"It did really well," the syndicate source said, adding that it traded solely on an outright basis given that its investment-grade rating made it appealing for outright investors.

GT Advanced Technologies Inc.'s planned new deal for $125 million of seven-year convertible notes was also in focus during the session, and even after price talk was revised to the tight end and beyond the tight end of talk, the paper still looked 2 to 3 points cheap.

The new deal was also cheap compared to an existing GT Advanced 3% convertible, which traded down along with the common stock over the last two days since the deal was launched.

The GT Advanced deal was one of four deals expected to price after the market close. But it was getting much of the market focus along with SouFun Holdings Ltd., a Beijing-based real estate internet portal and a home furnishing and improvement website, which planned to price an offering of $250 million of five-year convertibles under Rule 144A and Regulation S.

GT Advanced and SouFun stole the limelight, but there were two other deals as well. They included RAIT Financial Trust's $125 million of 20-year convertible senior notes that was coming as a registered, off-the-shelf deal via Barclays as bookrunner, and Endologix Inc.'s $75 million of five-year convertible notes, also in a registered deal, via BofA Merrill Lynch as bookrunner and Piper Jaffray & Co. as joint lead manager.

New RPM does well

RPM International's newly priced 2.25% convertibles due 2020 ended the session up at 103.625 bid, 104.375 offered with the underlying shares at $39.20.

The company's shares had been higher at late morning, up 2.3%, but they ended higher by only 1.5%.

The new issue was trading only on an outright basis. It was seen having a pretty light delta of only 35% to 40%.

"The nature of the bond as investment grade separates it from the pack," a syndicate source said.

The company's sector as a specialty chemical producer was also seen as appealing to outright investors.

The bonds outperformed their indicated valuation based on models, the syndicate source said.

Early in the session, the bonds jumped to about 103.5 and seemed to trade predominantly at about that level.

RPM International priced $200 million of seven-year convertible senior notes after the market close Tuesday. They priced at the tight end of 2.25% to 2.75% coupon talk and beyond the tight end of 30% to 35% talk on the initial conversion premium. The bonds had a 37.5% premium.

Using a credit spread of 110 basis points over Libor and a 17% vol., the deal looked to have fair value at 100.9 at the midpoint of talk.

The registered deal has a $5 million greenshoe and was sold via joint bookrunners Wells Fargo Securities LLC and Goldman Sachs & Co.

The notes have contingent conversion if the company's shares rise to 135% of the conversion price.

The securities are non-callable until Dec. 20, 2017 and then are provisionally callable if the shares rise to 125% of the conversion price. There is takeover protection.

Proceeds will be used to repay, redeem or refinance the company's $200 million of 6.25% senior notes due Dec. 15, 2013, with remaining proceeds to invest in high-quality, short-term investments.

GT Advanced looks cheap

Price talk was revised on GT Advanced's planned deal for $125 million of seven-year convertible notes ahead of final terms seen being fixed after the market close Wednesday, according to a market source.

Price talk was revised to a 3% coupon with an initial conversion premium of 37.5%, which was at the tight end of 3% to 3.5% coupon talk initially, and beyond the tight end of 30% to 35% talk on the premium when it was initially launched.

"It's a pretty small deal so I probably wouldn't see much of it," but it looked pretty cheap compared to the existing one," a New York-based trader said.

Even with the revised terms, the deal looked 2 to 3 points cheap.

Concurrently with the bond offering, the company is pricing an offering of 12 million shares of common stock.

Morgan Stanley & Co. LLC and Goldman Sachs & Co. were acting as joint bookrunning managers, with Canaccord Genuity Inc. acting as a co-manager.

There is an $18.75 million greenshoe of notes, which have contingent conversion and are non-callable for life.

Proceeds will be used for working capital and general corporate purposes, which may include acquisitions and capital expenditures.

Merrimack, N.H.-based GT Advanced Technologies is a provider of equipment and services that support the growth of the solar and LED industries.

Existing GT lower

GT Advanced's existing 3% convertibles traded down over the past two days in line with about a 10% drop in the underlying shares.

The existing bonds ended Wednesday at 139.75 bid, 104.75 offered with the shares at $8.92.

Shares were lower by 3.9% on Wednesday, and on swap they were in line, a trader said.

The bonds trade on about an 80% delta.

"The new convert is coming with new common," the trader said, indicating as to why the shares took a hit.

Even so the existing bond looks richer compared to the new paper that is coming.

SouFun, RAIT on tap

SouFun planned to price $250 million of convertibles after the market close at a yield of 1.75% to 2.25% and with an initial conversion premium of 35% to 40%.

The Rule 144A and Regulation S offering has a $50 million greenshoe and was being sold via joint bookrunners Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC.

The notes are non-callable for life with an investor put at par on Dec. 15, 2016.

The company plans to use the proceeds for general corporate purposes, including new products and services, working capital, capital expenditures, business expansion and potential acquisitions.

Also after the market close, RAIT Financial planned to price $125 million of convertible senior notes at a 4% coupon and 12.5% initial conversion premium. Terms were fixed, a syndicate source said.

The deal has a greenshoe of $18.75 million and was being sold via bookrunner Barclays.

RAIT intends to use the proceeds for working capital and general trust purposes, including potential repurchases of its outstanding 7% convertible senior notes due April 1, 2031. A portion of the proceeds will also be used to fund a capped call transaction with an affiliate of Barclays.

The notes are non-callable until Oct. 1, 2018, with puts in years five, 10 and 15, or Oct. 1 of 2018, 2023 and 2028.

There is standard dividend protection and change-of-control protection.

Philadelphia-based RAIT is a real estate investment trust focused on properties in Philadelphia and in the Baltimore to Washington, D.C., corridor.

Mentioned in this article:

Endologix Inc. Nasdaq: ELGX

GT Advanced Technologies Inc. Nasdaq: GTAT

RAIT Financial Trust NYSE: RAS

RPM International Inc. NYSE: RPM

SouFun Holdings Ltd. Nasdaq: SFUN

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