Planned BroadSoft quiet ahead of pricing; Best Buy adds outright; Sotheby's, GT Solar gain

By Rebecca Melvin

New York, June 14 - BroadSoft Inc. was quiet in the gray market Tuesday ahead of final terms, which were seen being fixed after the market close, market sources said. The $100 million offering of seven-year convertible senior notes was deemed too small to garner much attention.

Best Buy Co. Inc. added about 0.75 point outright as the underlying shares gained after the Richfield, Minn.-based consumer electronics retailer reported lower first-quarter earnings that were better than expected.

Sotheby's convertibles were in trade and higher with higher shares, as were UBS AG's exchangeables into GT Solar International Inc.

Also in trade was Janus Capital Group Inc., a rarely traded name.

After the market close, ATP Oil & Gas Corp. launched a $150 million offering of convertible perpetual preferred stock with a liquidation preference of $100 per share that was expected to price ahead of the market open Wednesday at a discount to par of 90% to 91%.

Overall, the convertible bond market was little changed Tuesday after several days of weakness. Because trading has been spotty, it was difficult to determine exactly in what kind of shape the market was in, sources said.

"We never really had widespread selling. Things caught a bit of a bid today; things didn't get worse," a New York-based trader said.

Whether Tuesday's session breaks a trend of several days of pressure was also uncertain.

"You look at most stock charts - or at least a lot of them - and they have come off their highs, and you have to at least think about stepping back into some of those things," the trader said.

BroadSoft looks OK, not great

With talk on BroadCom's offering wrapped around 1.5% with in initial conversion premium of 20%, the Gaithersburg, Md.-based telecom software maker was deemed 3% cheap using a credit spread of 600 basis points over Libor and 40% volatility, a New York-based sellside trader said.

The company that makes software enabling fixed-line, mobile and cable service providers to deliver voice and multimedia services over IP-based networks launched a $100 million offering of seven-year convertible senior notes after the market close Monday.

There's "not much room for error on this one. [The] credit is OK and it's a new name, but investors [are] getting more picky," the trader said.

Neither outright nor hedged players were crazy about the coupon rate, and both types of players had other, albeit different, issues, besides, the trader said.

"The consensus is that the deal will get done, but it will not do great. It will probably come at the mids, trade up a little, and nothing more than that," he said.

Perhaps hedge players, of which several considered the paper too long dated and too rich, will buy it at the cheaps, or at the 1.75% coupon with an initial conversion premium of 17.5%, he said.

Best Buy adds outright

Best Buy's 2.25% convertibles due 2022 traded at 101.75 versus an underlying share price of $30.85 on Tuesday, which compared to 101 versus an underlying share price of $28.45 on Monday.

Shares of the electronics retailer closed higher by $1.31, or 5%, to $30.13 in very heavy volume.

The company said its fiscal first-quarter profit fell 12%, hurt by increased promotional costs and lower demand for items including flat panel televisions and digital cameras. But the drop was better than expected.

The company also said that U.S. same-store sales declined at a slower pace than analysts were expecting.

Net income dropped to $136 million, or 35 cents a share, from $155 million, or 36 cents, a year earlier. Sales in the quarter rose 1.4% to $10.9 billion.

Sales at stores open at least 14 months fell 1.7%, including a 2.4% decline in the United States because of lower sales of televisions, digital cameras, CDs and DVDs.

The company kept its full-year outlook for adjusted profit of $3.30 to $3.55 a share and said that it sees sales at the higher end of its previously guided range of $51 billion to $52.5 billion.

Bright spots were domestic online sales, which rose 12%, while domestic mobile-phone comparable sales jumped 28% with connections increasing 20%.

Gross margin narrowed to 25.3% from 25.9%, hurt by increased promotions, higher transportation costs and supply chain disruptions of digital cameras because of the Japanese earthquake and tsunami.

ATP on tap

ATP planned to price $150 million of convertible perpetual preferred stock with a liquidation preference of $100 per share ahead of the market open Wednesday, according to market sources.

A New York-based buysider, commenting on the rarity of an overnight, registered deal, said that the paper coming at a discount was "irresistible as an alternative to the stock, given no yield on the common."

The registered, off-the-shelf deal was expected to come at a discount to par of 90% to 91% and was talked at a dividend of 8% with an initial conversion premium of 39%.

The preferred shares are convertible at $22.20 per share.

The securities are non-callable until Oct. 1, 2014 and then have forced conversion at the issuer's option if shares rise above 150% of the conversion price, or $33.30 per share.

Credit Suisse Securities (USA) LLC is the bookrunner of the offering, which has a $22.5 million greenshoe.

There is also standard dividend and takeover protection.

Proceeds are expected to be used to pay the cost of a capped call transaction, to fund capital expenditures and for general corporate purposes.

Houston-based ATP Oil & Gas is an offshore oil and gas development and production company with operations in the Gulf of Mexico and the North Sea.

Mentioned in this article:

ATP Oil & Gas Corp. Nasdaq: ATPG

Best Buy Co. Inc. NYSE: BBY

BroadSoft Inc. Nasdaq: BSFT

GT Solar International Inc. Nasdaq: SOLR

Janus Capital Group Inc. NYSE: JNS

Sotheby's NYSE: BID

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