Primary market percolates; new Insulet, Jakks trade higher; Illumina launches dual tranches

By Rebecca Melvin

New York, June 4 - There was a windfall of new issuance in the U.S. convertibles market on Wednesday, with two new issues having priced and in trade during the session, another three issues on tap and four more issues that launched after the market close. Of the eight issuers, Illumina Inc. is pricing dual tranches, and three are solar power companies.

In all, market players were considering $2.45 billion in new deals, not including over-allotment options.

Insulet Corp.'s new 2% convertibles, which priced ahead of the market open, traded up to 102 bid, 103 offered in the early going on Wednesday after the Bedford, Mass.-based medical device maker priced $175 million of the five-year notes at the rich end of talk. Insulet shares were up almost 1% at the time.

Jakks Pacific Inc.'s new 4.875% convertibles, which priced late Tuesday, were up as well, quoted at 100.5 to 101.25 with the underlying shares flat to slightly lower. The Malibu, Calif.-based toy and leisure products company priced an upsized $100 million of the six-year notes at the cheap end of talk.

At midmorning, the Jakks bonds were seen at 100.375 bid, 101 offered, a syndicate source said at the end of the day.

Also early Wednesday, SunEdison Inc. launched an offering of $500 million of 5.5-year convertible senior notes that were expected to price after the market close.

The Laclede Group Inc. was also expected to price its deal for $125 million of equity units after the market close. TPG Specialty Lending Inc., which was on tap, did price its $100 million of convertibles after the close at the midpoint of talked terms.

For Thursday, Illumina plans to price $900 million of convertible senior notes in two equal tranches, SunPower Corp. plans to price $400 million of seven-year convertible senior debentures, and Trina Solar Ltd. plans to price $150 million of convertible notes.

SunEdison's deal comes quickly on the heels of the St. Peters, Mo.-based solar company's dual tranches, which priced in December. But the new deal was still viewed as "attractive" on a valuation basis, and the older SunEdison issues were said to have traded up on a dollar-neutral basis, even though the underlying shares were up, a syndicate source said.

Elsewhere the market was said to be quiet.

SunEdison to price

SunEdison's planned $500 million of 5.5-year convertible senior notes were seen as "attractive" ahead of final terms being set following the market close.

Using a credit spread of 475 basis points over Libor and a 40% vol., the deal looked about fair value at 100.38 at the midpoint of talk, a New York-based trader said.

"The new issue allows investors a chance to get involved in a more balanced convertible rather than holding the more equity-sensitive old deals that trade in the 150s," the trader said.

Shares of the company were on the rise during the session and ended higher by $1.18, or 6%, at $20.67.

The new paper was talked at a 0.5% to 1% yield and a 25% to 30% premium.

The Rule 144A offering has a $100 million greenshoe and was being sold via joint bookrunners Deutsche Bank Securities Inc., Goldman Sachs & Co., Wells Fargo Securities LLC and Barclays.

The notes are non-callable, and the deal is coming with a call spread.

About $350 million to $400 million of proceeds will be used to fund acquisitions, development and construction costs. Proceeds will also be used for general corporate purposes and to pay the cost of a call spread.

Existing SunEdison adds

SunEdison older 2% bonds due 2018, or the A tranche, was said to have traded Wednesday at 159, while its 2.75% bonds due 2021 traded at 162.25, according to a syndicate source.

The bonds were called up 0.25 points to 0.5 points on swap.

The dual tranches priced in December for $800 million in proceeds.

The older issues mature on Oct.1, 2018 and Jan. 1, 2021, while the new deal matures Jan. 15, 2020.

St. Peters, Mo.-based SunEdison develops, manufactures and sells silicon wafers.

SunPower, Trina on tap

Two other solar companies are coming to market. San Jose, Calif.-based provider of high-efficiency solar cells, solar panels and solar systems, SunPower is pricing $400 million of seven-year convertible senior debentures, and China's Trina Solar is pricing $150 million of five-year convertibles.

Sun Power's notes, being marketed by active bookrunner Deutsche Bank Securities Inc. were talked to yield 1.5% to 2% with an initial conversion premium of 40% to 45%, according to a syndicate source.

The debentures will be convertible into shares of SunPower's common stock.

Total Energies Nouvelles Activites USA, a subsidiary of Total S.A., which owns about 60% of SunPower's common stock, has agreed to purchase $250 million of the issue. About $150 million will be offered to the public, a syndicate source said.

Proceeds of the SunPower deal will be used for general corporate purposes, including retirement of existing debt, pursuing its HoldCo strategy, capital expenditures and working capital.

The debentures are being offered under Rule 144A and to Total Energies Nouvelles Activites USA.

Trina Solar's deal was talked at 3.25% to 3.75% with an initial conversion premium of 27.5% to 32.5%, according to a syndicate source.

Trina is also pricing 8,800,000 American Depositary Shares. The offerings are contingent upon each other.

The Rule 144A and Regulation S convertibles deal is being sold by Deutsche Bank Securities, Barclays, J.P. Morgan Securities LLC, Goldman Sachs & Co. and HSBC.

The notes are puttable after three years.

In connection with the issuance of convertibles, Trina has entered into zero strike call option transactions with one or more of the initial purchasers of the notes. The call options are intended to facilitate derivative transactions between option counterparties and investors of the convertible bonds.

Illumina to bring $900 million

Illlumina launched an offering of $900 million of convertible senior notes, including five-year notes talked at a 0% to 0.5% coupon and the seven-year notes talked at a 0.5% to 1% coupon. Both have a 50% to 55% initial conversion premium, according to a syndicate source.

Pricing of the Rule 144A deal was expected after the market close Thursday. Each tranche has an over-allotment option for $67.5 million of additional notes.

The notes are non-callable with no puts and standard takeover and dividend protection features.

Joint bookrunners are BofA Merrill Lynch and Goldman Sachs.

Proceeds will be used to repurchase or repay a portion of Illumina's 0.25% convertibles due 2016. Remaining proceeds will be for general corporate proceeds.

Illumina is a San Diego-based developer of genetic research tools.

Mentioned in this article:

Illumina Inc. Nasdaq: ILMN

Insulet Corp. Nasdaq: PODD

Jakks Pacific Inc. Nasdaq: JAKK

The Laclede Group Inc. NYSE: LG

SunEdison Inc. Nasdaq: SUNE

SunPower Corp. Nasdaq: SPWR

TPG Specialty Lending Inc. Nasdaq: TSLX

Trina Solar Ltd. NYSE: TSL

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