Convertibles mostly weaker; solar names stabilize, but SunPower lags; BroadSoft to price

By Rebecca Melvin

New York, June 13 - The convertible bond universe was generally lower across the board on Monday, but a few solar names traded, with buyers stepping in following last week's sell-off and helping to stabilize that space, market sources said.

Convertibles were generally lower across the board, one trader said; while a buyside source suggested the root of the weakness might have been merely a reflection of market widening of spreads.

Suntech Power Holdings Co. Ltd. traded higher and JA Solar Holdings Co. Ltd. was firmer - although little traded in the second name, one trader said.

SunPower Corp., which is considered a different breed in the solar space due to its link up with French oil major Total SA, continued to trail off Monday after moving down last week in the general sell-off.

Clearwire Corp. traded lower with the underlying shares, which have been persistently coming in. Clearwire's shares were down 4.26% on Monday but were off the 52-week low touched in intraday trading.

Gilead Sciences Inc.'s convertibles, of which there are three issues, came in about 0.25 point each on hedge amid news that the Department of Justice has launched an investigation into Gilead's manufacturing and distribution practices.

In the primary market, BroadSoft Inc. launched after the market close an offering of $100 million of seven-year convertible senior notes that was seen pricing after the market close on Tuesday at talk of a 1.25% to 1.75% yield with an initial conversion premium of 17.5% to 22.5%.

"It was weaker across the board; the entire universe was better for sale," a New York-based sellside trader said.

As for the magnitude of the weakness, the source said it was "name specific. Some stuff was in a small amount like 0.125 to 0.25 point, and some stuff was in [multiple] points."

Suntech, JA Solar improve

Suntech Power's 3% convertibles due 2013 traded as high as 89 on Monday but also changed hands at 84 and 84.5, which was better compared to last week's depressed levels.

JA Solar's 4.5% convertibles due 2013 traded at 88 versus an underlying share price of $5.00, according to a New York-based sellside desk analyst.

There were also bids in the JA Solar at that level, but "there was nothing of size," a Connecticut-based trader said.

Nevertheless, the 88 JA Solar price was 1.25 points over previous levels, according to Trace data.

"I think, last week was a major sell-off, and things are stabilized today," a New York-based convertibles analyst said Monday. "Stocks have stopped dropping and buyers came in at those levels."

SunPower slips further

SunPower's 1.25% convertibles due 2027 traded at 98.75 versus a share price of $21.15.

SunPower 4.5% convertibles due 2015 traded at 108.125.

Shares of the San Jose, Calif.-based solar company ended higher by a dime to $21.27 in heavier-than-normal trading volume.

SunPower is a story that is somewhat different from the rest of the names in the solar space.

"It's more of a risk arb play given that 60% of the shares are going to be owned by Total. It's not a fundamental or solar industrial trade," the analyst said.

Most solar names are "fairly busted, and all are credit names," the analyst said.

The solar space got knocked down with a broad brush that was painting all things international and China downward in the aftermath of the Sino Forest Corp. story regarding alleged fraud.

Solars "are going to be choppy" for the medium to long term, the analyst said, given the unresolved nature of the Sino Forest situation.

SunPower faces a lawsuit filed with the California Superior Court from conservation groups opposing its 250-megawatt California Valley Solar Ranch project that has been approved by regulators.

On April 29, the convertibles were higher outright but came in on a hedged basis amid a spike in the underlying shares after news that Total has offered to pay $1.37 billion, or about $23.50 per share, for a majority stake in the San Jose, Calif.-based solar power company.

Gilead slips on hedge

Gilead Sciences' 1% convertibles senior notes due 2014 traded at 110.25 versus an underlying share price of $40.00 on Monday, according to a New York-based sellside desk analyst.

Gilead also has 1.625% convertibles due 2016 and 0.625% convertibles due 2013. All three of the issues came in about 0.25 point on hedge, according to a New York-based trader.

Shares of the Foster City, Calif.-based biopharmaceutical company were lower on Monday, ending down 27 cents, or 0.7% at $39.96. The shares and convertibles were weighed down by news released late Friday that the company had received a subpoena from the U.S. Attorney's Office for the Northern District of California.

The subpoena requests documents related to the manufacture and related quality and distribution practices of several of its drugs, including Atripia, Amtriva, Hepsera, Letairis, Truvada, Viread and the fixed-dose combination of Truvada and Edurant.

Gilead said in the release that it is cooperating in the civil and criminal investigation.

BroadSoft to price

BroadSoft, a Gaithersburg, Md.-based maker of 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 that were talked to yield 1.25% to 1.75% with an initial conversion premium of 17.5% to 22.5%.

The Rule 144A deal has a $20 million greenshoe and is being sold via bookrunners Goldman Sachs & Co. and Jefferies & Co.

The bonds will be non-callable for four years and then provisionally callable subject to a 140% price hurdle with a coupon make whole. There is dividend and takeover protection.

Proceeds are earmarked for general corporate purposes, including potential acquisitions.

Mentioned in this article:

BroadSoft Inc. Nasdaq: BSFT

Clearwire Corp. Nasdaq: CLWR

Gilead Sciences Inc. Nasdaq: GILD

JA Solar Holdings Co. Ltd. Nasdaq: JASO

SunPower Corp. Nasdaq: SPWRA

Suntech Power Holdings Co. Ltd. NYSE: STP

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