Spirit Realty edges up in gray; Banc of California launches units; Take-Two down outright

By Rebecca Melvin

New York, May 14 - Spirit Realty Capital Inc.'s planned $350 million of five-year notes were seen in the gray market ahead of final pricing Wednesday at plus 0.5 point bid, and the planned $200 million of seven-year notes were seen slightly higher at plus 0.5 point to plus 0.75 point bid, according to a New York-based trader.

The combined $550 million of convertibles were seen pricing after the market close.

The deal "looks OK," a New York-based trader said.

Also Wednesday, Banc of California Inc. launched an offering of $50 million of tangible equity units that will have two-day marketing and were talked with a coupon of 8% to 8.5% and a premium of 12.5% to 17.5%.

The bank also plans to price $50 million of common shares.

Also in the primary market, TAL Education Group, a Beijing-based provider of after-school tutoring, launched an offering of $200 million of five-year convertible notes under Rule 144A and Regulation S, according to a news release.

Elsewhere, trading was not very brisk in Take-Two Interactive Software Inc. after the New York-based interactive entertainment software company reported disappointing earnings. But the outright drop in the convertibles was notably large but for the most part matched an 8% slide in the shares.

For the second straight day L-3 Communications Holdings Inc. was the top-volume name in trade following a call of the New York-based aerospace and security contractor's 3% convertibles due 2035.

"There were outright sellers, all hedge buyers. That explains the weakness of the shares today," a New York-based trader said.

The L-3 bond traded around 130, which was lower on an outright basis, and the L-3 shares lost $3.11, or 2.6%, to $17.95. The company priced $1 billion of straight bonds, of which most will be used to redeem the 3% convertible bonds.

Equities turned lower Wednesday after the Standard & Poor's 500 stock index and Dow Jones industrial average closed at all-time highs on Tuesday.

In economic news. The producer price index for April rose 6%, which was higher compared to expectations for a 0.2% increase. But excluding volatile food and energy prices, the core PPI was up 0.3% but still above forecasts for a 0.2% increase.

The yield on the 10-year Treasury note slipped to 2.546% from 2.618%, which was its lowest level in more than six months.

The Dow fell 101.47 points, or 0.6%, to 16,613.97; the S&P 500 shed 3.92 points, or nearly 0.5%, to 1,888.53, and the Nasdaq Stock market fell by 29.54 points, or 0.7%, to 4,100.63.

Spirit Realty to price

Spirit Realty's two convertible bond tranches were getting a look over by market players on Wednesday ahead of pricing expected after the market close.

The bonds looked just OK for investors using a credit spread of 225 bps over Libor to 250 bps over Libor and a 20% vol., according to one trader.

The five-year notes were being talked with a 2.875% to 3.375% coupon, and the seven-year tranche was being talked at a 3.75% to 4.25% coupon. Both were being talked with a 17.5% to 22.5% premium.

Spirit Realty also plans to price 23 million shares of common stock.

The notes maturing May 19, 2019 have an over-allotment option for $52.5 million, and the notes maturing May 15, 2021 have an over-allotment option for $30 million.

Morgan Stanley, J.P. Morgan Securities LLC and RBC Capital Markets are joint bookrunners of the registered, off-the-shelf convertibles deal.

Scottsdale, Ariz.-based Spirit is a real estate investment trust focused on primarily commercial properties.

Banc of California to price

BofA Merrill Lynch is acting as bookrunning manager for the $50 million of tangible equity units that Banc of California plans to price for Friday trade. The units were talked at a yield of 8% to 8.5% and with an initial conversion premium of 12.5% to 17.5%.

The bank is also pricing $50 million of common stock.

Proceeds will be used to complete a previously announced acquisition of 20 California branches from Popular Community Bank and for general corporate purposes.

Neither offering is contingent on the completion of the other offering or on the completion of the acquisition.

The units mature May 15, 2017.

The bank holding company provides retail banking products and services and is based in Irvine, Calif.

Take-Two down with shares

Take-Two's 1.75% convertibles due 2016 were seen to have traded around 124 to 122 much of the session, but slipped to about 120 near the end of the day as shares slid $1.64, or 8%, to $18.99.

On Tuesday, the Take-Two convertibles traded at 126.875 versus an underlying share price of $20.69, according to a market source.

Take-Two's 1% convertibles due 2018, which are the longer-dated bonds, weren't heard to have traded, but were indicated at about 114.25, according to a market source. On Tuesday, the 1% convertibles ended the session at 118.40 versus an underlying share price of $20.69.

Take-Two shares ended down 8% after a 3.4% drop on Tuesday. The company reported fiscal fourth quarter results that were better than expected but guided the current quarter below consensus.

TAL to price

TAL's deal includes a $30 million greenshoe.

TAL cannot call the bonds, but holders can put the notes on May 15, 2017, and there is a takeover put at 100% of principal plus interest.

The company is entering into a capped call transaction with one or more initial purchasers of the bonds.

Proceeds will be used to pay the net cost of the capped call transaction, strategic investments and general corporate purposes.

Mentioned in this article:

Banc of California Inc. Nasdaq: BANC

L-3 Communications Holdings Inc. NYSE: LLL

Spirit Realty Capital Inc. NYSE: SRC

TAL Education Group NYSE: ADS: XRS

Take-Two Interactive Software Inc. Nasdaq: TTWO

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