New Qihoo notes active, ‘trade well’; Tyson mandatories trade below par; Web.com expands

By Rebecca Melvin

New York, Aug. 1 – Qihoo 360 Technology Co. Ltd.’s two new convertible issues “traded well” on their debut in the secondary market on Friday, edging up on an outright basis and gaining 0.5 point to 0.75 point on a dollar-neutral, or hedged, basis.

Beijing-based PC and mobile internet security products company priced $900 million of the notes in two tranches at what was essentially the midpoint of talk. The premium of the seven-year notes came at the cheap end of talk, however.

Both tranches were at 100.25 bid, 100.625 offered with the stock around $90.00, a syndicate source said Friday afternoon.

Tyson Foods Inc.’s 4.75% mandatories, of which $1.5 billion debuted in the secondary market on Thursday, were quoted at 49, which was below their 50 par but about 0.25 point better than how they ended on Thursday.

The Tyson paper priced at the rich end and beyond the rich end of originally talked terms.

The three deals totaled $2.4 billion of new paper for this past week. But one trader suggested that deal flow would quiet down going forward.

This week’s deals were “largely in the form of these two one-offs,” he said, referring to the two issuers, Tyson and Qihoo.

“Given the macro picture, and the fact that high-yield is shaky right now, and convertibles are heavy – although not as heavy as equities, or debt, for that matter; but August could factor into the quiet end of the summer,” the New York-based trader said.

“There were sellers around,” he said of the convertibles market in general.

Back in established issues, Web.com Group Inc.’s 1% convertible notes due 2018, which priced a year ago, plunged more than 10 points on an outright basis, but improved on a dollar-neutral, or hedged, basis after the Jacksonville, Fla.-based global domain name register reported quarterly results that missed revenue estimates. Shares dropped 24%.

In economic news, U.S. employers added 209,000 jobs in July, the Commerce Department said early Friday, but that was below the 233,000 additional jobs that were estimated. The unemployment rate ticked up to 6.2% from 6.1%.

The Dow Jones industrial average lost 69.95 points on Friday, extending losses from its 317-point slide on Thursday and ending down 2.7% for the week, its biggest weekly decline since January.

The S&P 500 slipped 5.52 points, or 0.3% to 1,925.15, and the Nasdaq Composite Index declined 17.13 points, or 0.4%, to 4,352.64.

Thursday’s downdraft was fostered by news that Argentina was deemed to be in default on its bond payments and Portugal’s Banco Espirito Santo posted an outsized net loss, sending its shares plummeting 50%.

Qihoos ‘trade well’

Qihoo’s 0.75% convertibles due 2020 were seen at 100.25 bid, 100.625 offered versus a share price of $90.00. And the Qihoo 1.75% convertibles due 2021 traded at the same level, which was seen better on a dollar-neutral basis by 0.5 point to 0.75 point.

Earlier the bonds were quoted at the same level with the underlying share price at $91.15, which is the stock reference for the new deals.

“They are trading well. It’s been a firm day for them,” a syndicate trading source said.

Qihoo shares were trading weakly and ended down 63 cents, or 0.7%, at $90.52.

Qihoo priced $900 million of the notes, divided equally between the six-year and seven-year paper.

The Rule 144A and Regulation S offering has a greenshoe for $135 million of additional notes, or $67.5 million per tranche.

Bookrunners were Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC. Co-managers were UBS Securities LLC and China Renaissance.

The six-year tranche was talked at a 0.25% to 0.75% coupon and a 35% to 40% premium. The seven-year tranche was talked at a 1.5% to 2% coupon and a 32.5% to 37.5% premium.

Holders can put the 2020 notes after three years on Aug. 15, 2017, and holders of the 2021 notes can put them after five years on Aug. 15, 2019.

Proceeds were earmarked for general corporate purposes.

Tyson mandatories below par

Tyson’s 4.75% convertible tangible equity units were quoted at 49 on Friday, which was up about 0.25 point on the day against shares that were essentially flat.

The mandatories debuted with a 50 par on Thursday and traded down “because everything was heavy.” But buyers stepped in early Friday, lifting the price slightly, a syndicate trading source said.

Tyson shares ended Friday’s session off 16 cents, or 0.4%, at $37.05.

“Everyone was sellers” on Thursday, the trading source said, and the issue was “heavy,” along with the broader markets, but “value buyers showed up this morning.”

On Thursday Tyson ended down 99 cents, or 2.6%, at $37.21.

Tyson priced $1.5 billion of convertible tangible equity units at $50 par with a distribution rate of 4.75% and an initial conversion premium of 25%, according to a prospectus.

Tyson also priced $900 million of common stock, or 23.81 million shares at $37.80 per share.

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC (active) and RBC Capital Markets LLC (passive) were joint bookrunners of the deal, with co-managers HSBC Securities (USA) Inc., Mizuho Securities USA Inc., Rabo Securities USA Inc., U.S. Bancorp Investments Inc., Credit Agricole Securities (USA) Inc. and MUFG.

Web.com holds in

Web.com’s 1% convertibles due 2018 were down to 91.875 bid, 92.875 offered, with the shares at $20.10, a Connecticut-based trader said.

That was down about 13 points on an outright basis, but the bonds were up about 0.5 point on a hedged basis, traders agreed.

Shares plunged $6.43, or 24%, to $20.12. The bonds had previously been 104ish with the underlying shares at about $26.55.

Web.com took a similar hit at the end of June on news that Google is entering the domain registration business with an invitation-only beta website.

On June 24, the bonds fell about 13 points to 103.5 bid, 104.5 offered with the shares down about 20% at $27.00.

Friday’s downdraft was sparked by its earnings report, which showed better earnings of $38.4 million, compared to $34.4 million in the year-earlier period and was in line with expectations. But revenue, which rose 10% to $144.66 million from the year-earlier period, was lower than estimated. The company’s guidance range was for $146 million to $147.5 million of revenue.

The company also announced that it will acquire Scoot, which owns a U.K. online directory service with more than 2.6 million listings.

Mentioned in this article:

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

Tyson Foods Inc. NYSE: TSN

Web.com Group Inc. Nasdaq: WWWW

© 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.