Planned Nuance convertibles slightly cheap; Teva deal timing accelerated; Inphi on tap

By Rebecca Melvin

New York, Dec. 1 – U.S. convertibles players were focused on the primary market on Tuesday as three new deals were getting things off to a good start for the last month of 2015, a New York-based trader said.

Nuance Communications Inc.’s planned $550 million of 20-year convertible bonds looked to be worth about 100.5 at the midpoint of price talk, using a credit spread of 200 basis points over Libor and 30% vol., a Connecticut-based trader said.

Nuance’s older 2.75% convertibles were flat to higher in active dealings in the early going. They were last seen at 102.5 to 103, according to a trader. Nuance shares were up about 0.9% at $21.11.

Timing for the pricing of Teva Pharmaceutical Industries Ltd.’s $3.375 billion mandatory convertible preferred deal was moved up by one day, to Wednesday after the market close, after being set initially for Thursday after the close, according to market sources.

Also in the primary market, Santa Clara, Calif.-based chip company Inphi Corp. launched an offering of $150 million of five-year convertible bonds, which was set to price after the market close on Wednesday.

Back in established issues, SunEdison Inc.’s convertibles traded flat to better but still at severely distressed levels as shares of the beleaguered renewable energy company rose amid a flurry of news headlines.

SunEdison canceled its plan to buy a $250 million stake in Brazil’s Renova Energia SA, and its yieldco TerraForm Power Inc. canceled its agreement to take control of projects of the Brazilian company in a share swap valued at $3.45 billion. The companies cited adverse market conditions for pulling out of the agreement.

There was a letter by hedge fund manager David Tepper outlining his dissatisfaction regarding SunEdison’s relationship with TerraForm, which he deems to be holding TerraForm back in terms of its performance and share price.

SunEdison’s 0.25% convertibles due 2020 traded at 31.125. The SunEdison 2.375% convertibles due 2022 traded at 31.9, and the SunEdison 3.375% convertibles due 2025 traded at 29, according to Trace data.

Elsewhere, Allscripts Healthcare Solutions Inc.’s 1.25% convertibles due 2020 rose 1.5 points outright to nearly 110, in tandem with a lift in the underlying shares after the Chicago-based medical IT software company after it announced a stock repurchase program of up to $150 million of stock by the end of 2018.

Allscripts shares were up at about $15.50 when the trades occurred.

Nuance slightly cheap

Nuance looked to be slightly cheap at about 100.5 at the midpoint of price talk, using a credit spread of 200 bps over Libor and 30% vol., according to a Connecticut-based trader.

But there were plenty of valuations using a tighter 350 bps spread, the trader said. And a second source was using a credit spread of 300 bps over Libor.

The Nuance deal was talked at a 1% to 1.5% coupon and 27.5% to 32.5% initial conversion premium. The deal was expected to price after the market close on Tuesday.

Nuance, a Burlington, Mass.-based provider of voice and language software, plans to price $550 million of 20-year senior convertible notes after the market close on Tuesday.

The bonds are non-callable for seven years, and there is a put in year seven. There is standard dividend and takeover protection, and the bonds will be net-share settled.

The Rule 144A deal has an over-allotment option for up to $82.5 million and was being sold via bookrunners Barclays and Morgan Stanley & Co. LLC.

Proceeds are being used to repay all outstanding term loans under its existing senior credit facility. Remaining proceeds and cash on hand will be used to repurchase about $200 million of shares of its common stock concurrently with the pricing of the debentures in transactions with initial purchasers, and to repurchase existing debt.

Inphi to price

Inphi plans to price $150 million of five-year convertible bonds after the market close on Wednesday that were talked to yield 0.875% to 1.375% with an initial conversion premium of 32.5% to 37.5%, according to market sources.

The Rule 144A deal has a $22.5 million greenshoe and was being sold via joint bookrunners Morgan Stanley and J.P. Morgan Securities LLC. Stifel, Nicolaus & Co. Inc. is a co-manager.

The notes are non-callable with no puts. They have takeover protection and will be settled in cash, shares or a combination of cash and shares.

In connection with the pricing of the notes, Inphi plans to enter into privately negotiated capped call transactions with one or more financial institutions, which may include initial purchasers of the bonds or their affiliates.

Proceeds of the notes are earmarked to pay for the capped call and for general corporate purposes, including potential acquisitions and other strategic transactions.

Mentioned in this article:

Allscripts Healthcare Solutions Inc. Nasdaq: MDRX

Inphi Corp. Nasdaq: IPHI

Nuance Communications Inc. Nasdaq: NUAN

SunEdison Inc. Nasdaq: SUNE

Teva Pharmaceutical Industries Ltd. NYSE: ADS: TEVA

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