Alon up on hedge; upsized Clean Energy trades outright only; GSV Capital, Protalix on tap

By Rebecca Melvin

New York, Sept. 11 - Alon USA Energy Inc.'s newly priced 3% convertibles traded up on an outright and dollar-neutral, or hedged, basis, with shares lower Wednesday after the Dallas-based refiner priced $130 million of the five-year notes at the rich end of talk, market players said.

The new Alon notes were as much as 3 points higher on a hedged basis assuming a delta of 65%, they said.

Clean Energy Fuels Corp.'s newly priced 5.25% convertibles traded at par to 101 on an outright basis after the Seal Harbor, Calif.-based owner and operator of natural-gas fueling stations priced an upsized $220 million of the five-year notes at the midpoint of talk.

Also in the primary market, GSV Capital Corp. launched an offering of $50 million of five-year convertibles early Wednesday, which was geared toward same-day pricing, and talked to yield 5% to 5.5% with an initial conversion premium of 30% to 35%. Given the deal's small size it wasn't a significant market focus.

After the market close, Israel-based Protalix BioTherapeutics Inc. launched an offering of $60 million of five-year convertibles that were expected to price post-close Thursday and were talked to yield 4.25% to 4.75% with an initial conversion premium of 15% to 20%, according to a syndicate source.

Back in the secondary market, Take-Two Interactive Software Inc.'s convertibles traded down along with the underlying shares of the San Francisco-based video game maker. Take-Two shares were downgraded to "sector perform" by Pacific Crest ahead of the company's anticipated release of Grand Theft Auto V next week.

So far this week, new deals have been relatively small and coming from slightly less known companies, which disappointed some market players who anticipated the tap to be opened wide for new issuance now that the summer slowdown is behind the market.

"I guess it could be next week," a New York-based convertibles analyst said Thursday. He concurred that issuance was lackluster despite strong underlying equity markets, which typically encourage the issuance of convertible bonds.

Perhaps a hindrance was high-yield spreads, which have come down over the last few days, attracting issuers to the relative cheapness of that asset class, the analyst said.

Alon adds on debut

Alon's 3% convertibles due 2018 were seen at 102.5 bid, 103 offered at the end of the session with the shares at $11.06.

With the shares down 1%, that still represented just about 3 points of expansion on a hedged basis, a syndicate source said.

Earlier, the new Alon convertibles were quoted at 102.5 bid, 103.5 offered with the stock at $11.06, and it was seen up 3 points on a 65% delta, according to a Connecticut-based trader.

When the stock dipped lower Wednesday afternoon, the paper was quoted at 102.25 versus an underlying share price of $10.98.

Shares lost ground into the close, ending down 0.8% on top of a 7.5% loss on Tuesday.

Pricing of the Rule 144A deal came at the tight end of talk, which was for a 3% to 3.5% coupon and 27.5% to 32.5% premium.

Goldman Sachs & Co. and Barclays were joint bookrunners of the offering, which has a $20 million greenshoe.

In connection with the offering, Alon entered into privately negotiated convertible note hedge and warrant transactions with initial purchasers of the bonds.

The strike price on the warrants was set at about $20.09 per share, which boosts the initial conversion premium from the issuer's perspective to 80%.

Proceeds will be used to fund the cost of the note hedge transactions and to fund the repurchase of a portion of the outstanding senior secured notes due 2014 issued by Alon Refining Krotz Springs Inc., a subsidiary of the company.

Based in Dallas, Alon is a refiner and marketer of petroleum products.

Clean Energy makes mild debut

Clean Energy's newly priced 5.25% convertibles due 2018 traded between par and 101, sources said.

Clean Energy shares ended the day up a nickel at $12.53.

Market players said the Clean Energy bonds were trading outright only and not actively given that stock borrow in the name is extremely limited.

"It's really a long only play," the Connecticut-based trader said.

An analyst said that the stock borrow cost was 7% to 8% and discouraged hedged participation. "A huge chunk of the shares are not available. About 25 million shares are with the founders," he said.

Clean Energy upsized the deal to $220 million from $200 million and pricing came at the midpoint of talk, which was for a 5% to 5.5% coupon and 22.5% to 27.5% premium.

Citigroup Global Markets Inc. and Morgan Stanley & Co. Inc. were joint bookrunners of the deal, which as a $30 million greenshoe.

The notes are non-callable for three years and then provisionally callable if shares rise to 160% of the conversion price.

The bonds will be physically settled.

Proceeds are expected to be used to fund capital expenditures and for general corporate purposes.

Based in Seal Harbor, Calif., Clean Energy is a provider of natural gas as an alternative fuel for vehicle fleets in the United States and Canada.

GSV Capital, Protalix to price

GSV Capital plans to price $50 million of five-year convertible senior notes after the market close Wednesday that were talked to yield 5% to 5.5% with an initial conversion premium of 30% to 35%, according to a syndicate source.

The Rule 144A offering has a $7.5 million over-allotment option and was being sold via Citigroup as bookrunner.

The notes are non-callable for life.

Proceeds will be used to acquire government securities to be pledged for the exclusive benefit of the noteholders, with remaining proceeds for general corporate purposes, which include investing in portfolio companies and to pay operating and other expenses.

Based in Woodside, Calif., GSV Capital is an investment fund that focuses on high-growth, venture-backed private companies.

Protalix launched an offering of $60 million of five-year convertibles after the market close Wednesday that were expected to price post close Thursday and were talked to yield 4.25% to 4.75% with an initial conversion premium of 15% to 20%, according to a syndicate source.

The Rule 144A offering has a $9 million over-allotment option and was being sold via Citigroup as a bookrunner. It was not known if other underwriters were on the deal.

The notes are non-callable for three years, then provisionally callable if shares rise to or exceed 130% of the conversion price.

Proceeds are earmarked to fund clinical trials for the company's product candidates, to fund its research and development activities, to enhance its manufacturing capacity and for working capital and general corporate purposes.

Carmel, Israel-based Protalix is a biopharmaceutical company that focuses on development and commercialization of recombinant therapeutic proteins.

Take-Two turns down

Take-Two's 1.75% convertibles due 2016 traded down about 3.5 points outright to 115.75 bid, 116.5 offered versus an underlying share price of $17.39 on Wednesday, according to a convertibles analyst. The paper at the close was marked 115.875 by a second firm.

The notes were seen trading on a 65% delta.

The Take-Two 1% convertibles due 2018 were seen down 3.25 points at 105.5 bid, 106.25 offered versus the $17.39 share price.

Take-Two shares ended down 84 cents, or 4.6%, at $17.30 in heavy volume.

The shares were weighed by a ratings downgrade by Pacific Crest, which pointed to the upcoming release of its Grand Theft Auto V game for the downgrade. The new game might disappoint, Pacific Crest said, and it leaves Take-Two with an empty pipeline.

Mentioned in this article:

Alon USA Energy Inc. NYSE: ALJ

Clean Energy Fuels Corp. Nasdaq: CLNE

GSV Capital Corp. Nasdaq: GSVC

Protalix BioTherapeutics Inc. NYSE: PLX

Take-Two Interactive Software Inc. Nasdaq: TTWO

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