NetApp in line to slightly lower; Vornado comes in slightly; Cenveo on tap for $75 million

By Rebecca Melvin

New York, March 21 - NetApp Inc.'s convertibles were among the busiest issues trading in the convertible bond market on Wednesday and were moving in line to slightly lower with the underlying equity bouncing around in active trade.

Vornado Realty Trust was active and trading a little lower, with traders watching a potential upcoming call for the Vornado 3.875% convertibles due 2025.

There were reports that the Vornado bonds were already called, but there was no company news release and the company could not be reached by Prospect News' deadline.

Cenveo Corp., a subsidiary of Cenveo Inc., planned to price $75 million of five-year senior exchangeable notes after the market close Thursday, a market source said.

The Rule 144A Cenveo offering was talked to yield 6.75% to 7.25% with an initial conversion premium of 17.5% to 22.5% and is conditioned upon completion of a concurrent offering of $225 million of senior straight notes.

Overall, the convertible market was quiet, with market players described as being in "a holding pattern," given current valuations.

"There's not a lot flying around as people are not particularly thrilled with valuations," a New York-based sellside analyst said.

With the exception of cyclicals, including coal, metals and commodity-related paper, "everything else is holding," the analyst said.

U.S. equities were mostly lower, although the tech-heavy Nasdaq Stock Market eked out a gain.

Goldman Sachs published a note for global clients early Wednesday asserting that equities are the place to be for investors, one trader noted. Nevertheless, there are also pundits calling for a pullback or even recession, an analyst said.

Meanwhile, the CBOE volatility index, or VIX, slipped a little further on Wednesday to 15.13, which was down another 0.45 point, and at a level that can be read as a signal that trouble may be brewing.

With worries related to the European debt crisis on the back burner and China looking slightly better, investors are focused on the United States, where economic data has been benign of late, the analyst said.

"But if the U.S does turn, people will get negative on the rest of world," he asserted.

The analyst is focusing on U.S. income and spending data as opposed to employment and claims data, and is skeptical that those figures will be strong enough to continue to build strength in U.S. equities, which with the exception of the past two days, has been extremely strong.

"The macro tail risks seem to have subsided, and looking at the global landscape Europe and China look slightly better at this point, but if the U.S. started to turn, people would get pretty negative on China," he said.

There were no new issues in the U.S. convertible primary market for a third session, but after the market close Cenveo launched a small deal.

Overseas, Solidium Oy priced €600 million of 3.5-year bonds with a 0.5% coupon, the rich end of talk, that will be exchangeable into shares of TeliaSonera AB.

Meanwhile, Shoprite Investments (Proprietary) Ltd., a subsidiary of Shoprite Holdings Ltd., launched a Regulation S deal for ZAR 4.5 billion of five-year convertibles at par to yield 6.125% to 6.625%, with an initial conversion premium of 32.5% to 37.5%. Pricing was seen Thursday.

NetApp in line to lower

NetApp's 1.75% convertibles due 2013 were seen going out Wednesday at 148.625 bid, 148.875 offered, versus an underlying share price of $47.02, which was in line to down slightly on a hedged basis, according to a New York-based trader.

Shares of the Sunnyvale, Calif.-based data storage company ended up 71 cents, or 1.6%, to $46.02 in active trade on Wednesday.

The NetApp convertibles "came in a teeny on Tuesday and a lot more traded today, and those look in line to 'in' a little bit," the trader said.

"It's one of the more liquid names that for lack of other things to trade is whipping around a little bit," the trader said.

The bonds were on a mid delta of 85% on Wednesday, he said.

Vornado comes 'in' slightly

Vornado's 3.875% convertibles due 2025 ended the session at about 100.5, which was down slightly from earlier prints at 100.75. On Monday, the paper was 100.75 to 100.875.

Shares of the New York-based real estate investment trust ended the session down 60 cents, or 0.7%, at $84.25 in average volume.

"The VNO 3.875% traded a good amount," a trader said.

Cenveo to price

Cenveo, a Stamford, Conn.-based manager and distributor of print and related products and services, launched a $75 million Rule 144A offering of five-year senior exchangeable notes after the market close Thursday.

Price talk on the issue was for a coupon of 6.75% to 7.25% and an initial conversion premium of 17.5% to 22.5%.

The deal, with an $11.25 million greenshoe, is conditioned on completion of a concurrent offering of $225 million of senior straight notes.

Bank of America Merrill Lynch and Morgan Stanley & Co. LLC are the joint bookrunners of the offering, which is non-callable.

Proceeds, together with proceeds of the previously announced straight note offering and borrowings under its credit facility, will be used to fund Cenveo's tender offer of 7.875% senior notes due 2013, 8.375% notes due 2014 and 10.5% notes due 2016 or to refinance or repurchase other debt.

The deal is being issued by a Cenveo subsidiary, Cenveo Corp.

Mentioned in this article:

Cenveo Inc. NYSE: CVO

NetApp INc. Nasdaq: NTAP

Shoprite Holdings Ltd. Johannesburg: SHP

Vornado Realty Trust NYSE: VNO

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