Twitter, Tesla lower, in line; TiVo, Alcoa to price; Alere shares surge; Golar turns heads

By Rebecca Melvin

New York, Sept. 15 – Twitter Inc.’s convertible bonds, which debuted in the market on Friday, were notably lower on an outright basis but were trading in line, or flat, on a hedged basis on Monday against lower shares. The same was true of Tesla Motors Inc.’s newer A and B tranches, which were said to be trading flat against a $25.00 drop in the underlying shares.

Yandex NV’s convertibles were also in line against a 5% move lower in the underlying shares. The Yandex bond was quoted at 90.5 versus an underlying share price of $30.50. That was in line if investors held the bonds on a 55% delta, a trader said.

But SanDisk Corp.’s 1.5% convertibles were a little weaker with shares down about 1.5%. The bonds traded down a couple of points on an outright basis to 191.3. That was 2.5 points over parity on a hedged basis versus an underlying shares price of $97.85 and about 0.25 point lower,” a trader said.

Nevertheless, much of the market was said to be in line.

“Everything seems fine. You’ve got good two-way flow, nothing is overly heavy. For the most part, people are sitting on their hands, waiting to see the outcome of the FOMC meeting and the Scottish vote,” a New York-based trader said.

Central bankers are set to meet tomorrow for their routinely scheduled Federal Open Market Committee meeting. The Fed’s statement and a press conference with Fed chairman Janet Yellen are slated for Wednesday.

Treasuries were stable on Monday after a sell-off last week. The yield on the 10-year benchmark was about 2.59%, after having risen to about 2.6% from 2.3%.

After the market close, two new deals were launched in the primary market. TiVo Inc. launched an offering of $200 million of five-year convertible senior notes, and Alcoa Inc. launched an offering of $1.25 billion of three-year mandatory convertible preferred shares. Both deals were seen pricing after the market close on Tuesday.

Back in the secondary market on Monday, Alere Inc.’s convertibles were in focus as shares of the Waltham, Mass.-based diagnostics and services company surged 13% on news the company’s former chief executive officer, Ron Zwanziger, is working with shareholders to buy the company and take it private for $46.00 a share.

Another name getting a look from market players was Golar LNG Ltd., which has a Regulation S bond that was looking cheap and hedge-able following the company’s secondary offering of common stock earlier this month.

Twitter drops outright

Twitter’s new 0.25% convertible A tranche traded down more than 3 points to 95.26 from about 98.75 to 99 late Friday.

Twitter’s new 1% convertible B tranche traded down 3.625 points to 95.75 from about 99 bid, 99.25 offered late Friday.

Shares of the San Francisco-based social media company dropped $2.73, or 5.2%, to $49.38.

“They seem in line dollar neutral, but on an outright basis, that’s a lot of points,” a New York-based trader commented.

“It’s stock related,” the trader said.

The company priced an upsized $1.8 billion of the new bonds late Thursday at pricing that came at the midpoint of talk.

TiVo to price

TiVo, the California-based provider of technology and services for digital video recorders, plans to price $200 million of five-year convertible senior notes after the market close Tuesday that were talked at a 1.75% to 2.25% coupon and a 30% to 35% initial conversion premium.

The Rule 144A deal has a $30 million greenshoe and was being sold via bookrunners Barclays and Deutsche Bank Securities Inc.

Proceeds are earmarked for general corporate purposes, including share repurchases, including the immediate repurchase of up to $50 million shares of common stock, and to fund net cost of a call spread.

Concurrently with the deal, the company plans to enter into convertible note hedge and warrant transactions, or a call spread, which boosts the initial conversion premium from the issuer’s perspective.

The bonds are non-callable for life with no puts. There is takeover and dividend protection, and settlement will be made in cash and shares.

Alcoa to price mandatories

Alcoa, the New York-based aluminum producer, plans to price $1.25 billion of three-year mandatory convertible preferred shares with a $50.00 per share liquidation preference price that were talked to yield 5% to 5.5% with an initial conversion premium of 20% to 25%, according to a market source.

Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC are acting as joint bookrunners of the registered off-the-shelf deal, which was expected to price after the market close on Tuesday.

Proceeds will be used to finance the previously announced proposed acquisition of the Firth Rixson business and related fees. Completion of the offering is not contingent on the acquisition.

Alere rises with shares

Alere’s 3% convertibles due 2016 were seen early Monday at 108.25 bid, 109.25 offered with the shares up, a Connecticut-based trader said. Later the bonds were seen offered on the Street at 111 versus a share price of $41.00, without a bid.

The Alere 3% convertible B preferreds were 350 bid, 370 offered, the Connecticut trader said.

Alere shares surged $4.53, or 12.4%, at $41.14 on Monday.

They were up “with the ex CEO trying to buy them,” a trader said.

Golar looks cheap

Golar’s 3.75% convertibles due 2017 were seen at about 150 versus an underlying share price of $67.50, a New York-based trader said.

“They look about 3 points cheap on an 80% delta,” the trader said.

Golar priced about 27.83 million shares of common stock by its principal shareholder World Shipholding Ltd. at $58.50 per share. There was a greenshoe for an additional 4.17 million shares. The company will not receive any proceeds from the offering that was sold via BofA Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and RS Platou Markets AS, with BNP Paribas, DNB Markets and Pareto Securities as co-managers.

“The common used to be pretty difficult to borrow, but now it’s top rate,” the trader said and estimating that the bonds were better by about a point in the past week.

“The secondary equity deal made a huge difference to the valuation,” the trader said.

Using a credit spread of about 400 bps over Libor and a 40% vol., the bonds are about 3 points cheap, he said.

It’s hedge-able,” he said. There is a less than 10% premium on this name.

Mentioned in this article:

Alcoa Inc. NYSE: AA

Alere Inc. NYSE: ALR

Golar LNG Ltd. Nasdaq: GLNG

SanDisk Corp. Nasdaq: SNDK

Tesla Motors Inc. Nasdaq: TSLA

TiVO Inc. Nasdaq: TIVO

Twitter Inc. Nasdaq: TWTR

Yandex NV Nasdaq: YNDX

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.