NetApp better; new GM convertible preferred paper eyed; SanDisk launches $1 billion deal

By Rebecca Melvin

New York, Aug. 18 - NetApp Inc. was better and saw some trades Wednesday ahead of its earnings report posted after the close. Salesforce.com was also better to buy - both names having recovered in the past few sessions - as investors eyed the earnings of that company for Thursday.

Better to buy generally means that the bid in the bonds is stronger, while the offer is possibly nebulous.

There was also chatter about General Motors Co. planning a mandatory convertible preferred offering as part of its initial public offering of common stock, according to an S-1 filing with the Securities and Exchange Commission.

No details were available on the GM offering, although a Reuters report put the deal size at $3 billion, citing unnamed sources.

Prior to its Chapter 11 bankruptcy filing in June 2009, GM had four convertible bond issues.

A syndicate source said the planned MannKind Corp. convertible would be priced as planned at $100 million in size and within the talked range, which had a midpoint of 5.5% for a coupon and a 22.5% initial conversion premium.

Immediately after the close, SanDisk Corp. announced that it planned to price $1 billion of seven-year convertible notes. Sources said the deal was talked at a coupon of 1.25% to 1.75% with an initial conversion premium of 22.5% to 27.5% via joint bookrunners Morgan Stanley and Goldman Sachs. The deal was seen pricing Thursday after the market close.

Newell Rubbermaid Inc. remained a top-volume name after the terms of its "flushout" of the 5.5% notes were announced Tuesday.

Otherwise it was pretty quiet, with the summertime slowdown just about hitting a peak as volume Wednesday was as light as volume on Monday and Tuesday, according to a Connecticut-based sellside trader.

NetApp strengthens

NetApp's 1.75% convertibles due 2013 were at 134.75 bid versus a share price of $39.25 Wednesday, after a buyer was found that pulled up that paper a point to 1.25 points, a sellside trader said.

"Some names have definitely gotten better," the sellsider said. "Some of the put names, that had their stocks crunched last week - those bond have finally expanded."

NetApp was an example of that, with strength seen the last couple of days ahead of earnings that were posted after the close Wednesday.

Although the Sunnyvale, Calif.-based company's fiscal first-quarter results topped estimates, and second-quarter forecasts were above view, shares of the company fell nearly 5% in after-hours trade.

The move in the underlying shares reversed an upward move during the session that left the shares up 67 cents, or 1.7%, at $39.32 by 4 p.m. ET.

About the bonds, a sellsider said: "They had slid, in about a point. With the stock down, the bonds came in under a little bit of pressure. Then when the stock got slammed, coming in 15%, it took a couple of days for the bonds to recover. But they found a buyer and are a point to 1.25 [points] better.

Salesforce.com better to buy

Salesforce.com's 0.75% convertibles due 2015 were around 131 versus a share price of $99.80 Wednesday and were called better to buy.

Shares of the San Francisco-based customer relationship management software company ended unchanged at $99.33.

"With all the earnings coming up, there's buy interest. CRM reports after the close tomorrow. The stock has held in there; but there's a lot of air there, and people are going to be watching those results," a sellsider said.

GM plans mandatory offering

GM said it plans to issue series B mandatory convertible junior preferred stock as part of its proposed IPO of common stock to be sold by certain of its stockholders.

GM said the offering will be determined by market conditions and other factors at the time of the offering, and neither the number of shares to be offered nor the price range for the offering had been determined.

"It's a giant forward stock sale. I'm not very excited by it," a sellside trader said.

But a New York-based buysider said, "I'm interested primarily because we need a larger market - and also because GM is a widely recognized name, which will glean publicity for the convertible market."

Morgan Stanley and JPMorgan (representatives of the underwriters), Bank of America Merrill Lynch, Citigroup, Goldman Sachs & Co., Barclays Capital, Credit Suisse, Deutsche Bank Securities, RBC Capital Markets, and UBS Investment Bank will be the joint bookrunners for the offering.

GM, a Detroit-based automaker, will list its shares on the New York Stock Exchange and Toronto Stock Exchange after its IPO, a source familiar with the matter said on Wednesday.

GM filed for bankruptcy June 1, 2009 to complete a sale of substantially all of its assets to a newly formed company. According to court documents, prior to the filing GM had $82.29 billion in assets and $172.81 billion in debt as of March 31, 2009.

SanDisk to price

SanDisk said it will sell $1 billion of seven-year convertible senior notes after the market close Thursday that were talked at a coupon of 1.25% to 1.75% and an initial conversion premium of 22.5% to 27.5%, according to market sources.

Morgan Stanley and Goldman Sachs are the joint bookrunners of the registered offering.

There is a greenshoe for up to another $150 million of notes.

Proceeds will be used for general corporate purposes, including repayment of a portion of its $1.15 billion of 1% convertibles, which were issued in 2006.

The existing SanDisk 1% bonds traded after hours at 95.75, which was up almost 2 points from Tuesday, according to a sellside trader.

Mentioned in this article:

Alcoa Inc. NYSE: AA

MannKind Corp. Nasdaq: MNKD

NetApp Inc. Nasdaq: NTAP

Newell Rubbermaid Inc. NYSE: NWL

Salesforce.com NYSE: CRM

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