Post, Finisar lag on debuts; NorthStar Realty in line, weaker; Yandex; E-House look cheap

By Rebecca Melvin

New York, Dec. 11 - Post Holdings Inc.'s newly priced 2.5% perpetual convertible preferred shares sank after the St. Louis-based cereal maker priced $300 million of the preferreds at the cheap end of coupon talk and at the fixed 10% premium talk.

The new Post traded around 97 bid, 98 offered out of the gate and were quoted near the close at 96.5 bid, 97.25 offered versus an underlying share price of $47.50.

The old, 3.75% Post's perpetual preferred, of which $241.5 million priced in February, were not heard in trade.

Finisar Corp.'s newly priced 0.5% convertibles traded off slightly on their debut in the secondary market early Wednesday after the Sunnyvale, Calif.-based fiber-optic equipment maker priced an upsized $225 million of the 20-year senior notes at price points that were fixed when the deal was launched.

The new Finisar was seen at 99 bid, 100 offered in the early going, market sources said.

Back in established issues, NorthStar Realty Finance Corp.'s convertibles, including its 5.375% exchangeables due 2033, traded in line to slightly lower on a dollar-neutral, or hedged, basis amid a surge in the underlying shares of the New York-based commercial real estate investment trust, a New York-based trader said.

NorthStar's shares jumped 20% on its plan to spin off its asset management business into a separate publicly traded company. A listing on the New York Stock Exchange was seen during the second quarter of 2014.

The convertibles of Chinese companies with American Depositary Receipts were also weak, including those of Qihoo 360 Technology Co. Ltd. and Ctrip.com International Ltd., the trader said.

The ADRs were weak as well. Qihoo shares were down 3.6% at the end of the session. Ctrip shares were down 4.8%, and shares of NQ Mobile Inc., which also has a convertible bond, fell 4.6%.

Also in focus on Wednesday were another crop of new issues expected to price after the market close.

Yandex NV's $600 million of five-year convertible bonds were looking pretty cheap. Using a credit spread of 350 basis points over Libor and a 35% vol., one Connecticut-based trader saw the deal worth 102 at the midpoint of talk. But he raised concerns related to the company's business as an internet search engine in Russia and internationally.

Likewise, E-House (China) Holdings Ltd.'s $180 million of five-year convertibles were seen as cheap, but the Beijing-based real estate services company raised red flags for the trader.

Trulia Inc.'s $150 million of seven-year convertible senior notes were seen at fair value at 99.6, according to this trader, using a credit spread of 675 bps and a 35% vol. Trulia is a San Francisco-based real estate site.

Post drops on debut

Post's newly priced 2.5% perpetual convertible preferred shares were last heard at 96.75 bid, 97.25 offered versus an underlying share price of $47.50.

Post shares ended lower by $1.92, or 3.9%, at $47.28.

"They were weak," a New York-based trader said. He said his bank wasn't overly active in the name. But he guessed that the new paper came in, or contracted, on a dollar-neutral basis "because there were a few sellers in the name."

A second trader said that on a 90% delta, the new Post preferreds came in probably 0.25 point dollar neutral.

Post, the St. Louis-based cereal maker, priced its second perpetual convertible preferred inside of a year. The new $300 million of perpetual convertible preferred shares was said to "look decent" ahead of final terms being fixed late Tuesday.

The Rule 144A offering was talked to yield 2% to 2.5% with an initial conversion premium of 10%.

Proceeds will be used for general corporate purposes, which may include pending or future acquisitions, working capital and capital expenditures.

Bookrunners were Credit Suisse Securities (USA) LLC, Barclays, Goldman Sachs & Co. and Wells Fargo Securities LLC.

Finisar trades weakly

Finisar's newly priced 0.5% convertibles traded weakly out of the gate on Wednesday after being released for secondary dealings. They were seen at 99 bid, 100 offered Wednesday morning.

Finisar shares slipped at the open but recovered later in the session, ending the day unchanged at $21.56.

The fiber optics company priced an upsized $225 million of the 20-year convertible senior notes at par to yield 0.5% with an initial conversion premium of 40%.

The Rule 144A offering was initially talked at $200 million in size. The deal also has a $33.75 million greenshoe, which was upsized from $30 million. Pricing came at price points that were fixed when the deal was launched.

BofA Merrill Lynch was the bookrunner.

The bonds have contingent conversion if shares exceed 130% of the conversion price and also net share settlement.

The securities are non-callable for until Dec. 22, 2018, with puts on Dec. 15, 2018, Dec. 15, 2023 and Dec. 15, 2028. There is also a change-of-control put.

Proceeds will be used for general corporate purposes, including working capital, and a portion of the proceeds may be used to acquire complementary businesses, products or technologies, although Finisar has no present commitments related to acquisitions.

Finisar saw its shares jump last week when the fiber-optic equipment maker posted quarterly results that were stronger than expected and guided for a good quarter.

For the quarter ended Oct. 27, Finisar reported $30 million in profit, or 29 cents a share, which was up from $271,000, or less than a penny a share, a year earlier. Excluding stock-based compensation and other items, adjusted profit rose to 43 cents from 15 cents, and revenue climbed 25% to $290.7 million.

That was better than the 37 cents to 41 cents that the company projected, and revenue was expected at that time to be between $277 million to $292 million, a view that exceeded Wall Street's expectations at the time.

Looking ahead, the company sees third-quarter earnings between 43 cents to 47 cents a share and revenue of $290 million to $305 million. Analysts surveyed by Thomson Reuters expected 38 cents a share and $290 million, respectively.

Mentioned in this article:

Ctrip.com International Ltd. Nasdaq: CTRP

E-House (China) Holdings Ltd. NYSE: EJ

Finisar Corp. Nasdaq: FNSR

NorthStar Realty Finance Corp. NYSE: NRF

NQ Mobile Inc. NYSE: NQ

Post Holdings Inc. Nasdaq: POST

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

Trulia Inc. Nasdaq: TRLA

Yandex NV Nasdaq: YNDX

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