Interactive Intelligence looks cheap on the mids; Emerald Oil gains; Whiting Petroleum up

By Rebecca Melvin

New York, May 19 – Interactive Intelligence Group Inc.’s $150 million offering of five-year convertibles was looking about 1.5 points cheap at the midpoint of price talk, assuming a credit spread of 550 basis points over Libor and a 35% vol., a Connecticut-based trader said Tuesday.

A second Connecticut-based market source concurred with those assumptions, saying his valuation was similar.

The Interactive Group deal, which was expected to price after the market close on Tuesday, was talked at a 1.25% to 1.75% coupon and a 27.5% to 32.5% initial conversion premium.

Elsewhere, Emerald Oil Inc. was active and moved up on an outright basis by about 4 points after the Denver-based independent oil exploration and production company said that it plans to price $150 million of common stock in a secondary offering.

Other energy names were also in focus as the overall energy sector was under pressure amid lower oil and natural gas prices, a New York-based trader said.

Whiting Petroleum Corp.’s convertibles were lower outright but edged up on a dollar-neutral, or swap, basis amid lower shares of the Denver-based oil and gas E&P company.

Also Take-Two Interactive Software Inc.’s two convertible bond issues popped in active trade along with higher shares after the New York-based video game publishing company beat profit estimates but missed revenue guidance and also guided higher for the current quarter.

Take-Two’s 1% convertibles due 2018 were seen ending the session at nearly 142.5, which was up 12 points or 13 points on the day on an outright basis, according to Trace data. The bonds were indicated slightly higher at 143, according to a second market source.

Take-Two’s 1.75% convertibles due 2016 traded as high as 154 but looked to have come off that level and traded much of the session at 151 bid, 151.75 offered, which was up 16 points on the day on an outright basis.

Take-Two’s shares gained $4.42, or 18%, to $28.62.

Meanwhile, Yahoo! Inc.’s 0% convertibles came off a couple points late in the session in tandem with a drop in the underlying shares of the Sunnyvale, Calif.-based internet company only minutes before markets closed.

Yahoo! shares closed down $3.38, or 7.6%, to $40.98. Yahoo!’s bonds were seen to have changed hands at 106, which was off from 108 plus on Monday.

The sharp downward move may have been related to news regarding a possible rule change by the U.S. Internal Revenue Service that would affect Yahoo!’s planned spinoff of its stake in Alibaba Group Holding Ltd.

U.S. stock indices ended narrowly mixed. The Dow Jones industrial average rose 13.51 points, or 0.07%, to 18.312.39, which represented a new record high.

Interactive Intelligence eyed

Interactive Intelligence was not seen in the gray market ahead of final terms expected to be fixed after the market close.

The deal may be too small to get much traction in the gray market, a New York-based trader said.

But the deal looked to have a fair value of about 101.5, assuming a credit spread of 550 bps over Libor and a 35% vol.

Interactive Intelligence, an Indianapolis-based communications software and cloud services company, has a market capitalization just shy of $1 billion. It launched its $150 million offering of five-year convertibles after the market close on Monday in a Rule 144A deal.

Bookrunning managers include Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and RBC Capital Markets LLC.

The notes are non-callable with no puts. They will be settled in cash, stock or a combination. In connection with the pricing of the notes, the company plans to enter into capped call transactions with one or more initial purchasers of the notes.

A portion of the proceeds will be used to pay the net cost of the capped call transactions with remaining proceeds for working capital and general corporate purposes.

Emerald Oil rises

Emerald Oil’s 2% convertibles due 2019 traded up to about 65 from 60 to 62. That was a good bump higher, although the issue is still severely distressed, a trader pointed out.

The company is “out raising more money and that is marginally good for the credit,” the trader said.

Emerald Oil said that it is pricing $150 million of common stock in a secondary offering.

Proceeds of the common deal will be used to fund its previously announced acquisition of certain assets in the Delaware Basin, to repay outstanding credit facility borrowings and for general corporate purposes.

Emerald Oil shares had been down about a nickel, or 7.6%, at $0.55 at late morning but were seen closing little changed at $0.5960.

Whiting Petroleum edges up

Whiting’s 1.25% convertibles due 2020 moved lower on an outright basis to 111 bid, 111.5 offered at the market close versus an underlying share price of $33.26, which was down 91 cents, or 2.7%.

The bonds went into the day at about 112.25 bid, 112.75 offered, according to a New York-based trader.

On a swap basis, the bonds expanded about 0.125 point to 0.25 point versus a stock level of $33.35, he said.

Whiting shares were under pressure with lower crude oil and natural gas prices.

“There has been a good amount of Whiting that traded,” the trader said.

He said they were lower outright with the move in energy prices.

“Away from that it was very quiet. Just another sideways day,” the trader said.

Mentioned in this article:

Emerald Oil Inc. NYSE: EOX

Interactive Intelligence Group Inc. Nasdaq: ININ

Take-Two Interactive Software Inc. Nasdaq: TTWO

Whiting Petroleum Corp. NYSE: WLL

Yahoo! Inc. Nasdaq: YHOO

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