Scorpio Tankers, Dominion launch deals; $950 million supply eyed Tuesday; Web.com expands

By Rebecca Melvin

New York, June 24 –Another new deal launched in the convertibles market early Tuesday, bringing the tally of new paper to price after the market close to $950 million in three deals, while a fourth deal launched after the market close for $900 million to price late Wednesday.

Monaco-based oil tanker company Scorpio Tankers Inc. launched an offering of $250 million of five-year convertible senior notes early Tuesday that one New York-based trader said looks “decent,” with only one other issue in the same space, namely DryShips Inc.’s 5% convertible senior notes, which mature in six months, and which traded at 99 on an outright basis on Tuesday.

Scorpio Tankers joined California network-security company Palo Alto Networks Inc.’s $500 million offering of five-year convertible senior notes and Latin America’s online commerce host MercadoLibre Inc.’s $300 million offering of five-year convertible senior notes for pricing after the market close.

After the market close, Dominion Resources Inc. launched a $900 million offering of three-year mandatory convertible equity units that was coming with one-day marketing, or pricing after the market close on Wednesday.

The downpour of new issuance meant that the secondary market was generally weaker on Wednesday, as market players made room for new issuance, a New York-based trader said after the market close.

But during the session, traders said that there wasn’t much action overall and relatively little reaction to the more than $2 billion of new issuance that will hit the market in the next few days.

“I think it’s too early to tell; everyone seems to be milling around the tape,” a New York-based trader said in the early going.

One name that did better on a hedged basis was Web.com Group Inc.’s 1% convertibles due 2018, which slid about 13 points against a 20% plunge in the underlying shares of the Jacksonville, Fla.-based global domain name register. The shares tanked on news that Google is entering the domain registration business with an invitation only beta website.

On a dollar-neutral, or hedged, basis the bonds expanded by about 0.5%, assuming a 70% delta, a New York-based trader said.

Scorpio Tankers to price

Scorpio Tankers launched a $250 million convertible five-year note early Tuesday for pricing later the same day. It was talked to yield 2.125% to 2.625% with an initial conversion premium of 27.5% to 32.5%.

The new paper in the tanker space didn’t seem to affect DryShips.

“They have a totally different profile,” a trader said of the DryShips and Scorpio Tankers notes. DryShips matures in six months, and the Athens-based dry bulk and tanker company is going to need to refinance to pay out the maturing 5% notes, he said. “Everyone is on the lookout for that.”

This trader also said that he was surprised that there wasn’t selling pressure of significance despite all the new paper.

“It just comes down to valuation,” he said, adding that Scorpio looked to be a “decent” deal.

Dominion to price

Richmond, Va.-based energy company Dominion plans to price $900 million of three-year mandatory convertible equity units, or 18 million units at $50 par, after the market close Wednesday.

The deal was talked to yield 6.625% to 7.125% with an initial conversion premium of 22.5% to 27.5%, a syndicate source said.

The registered deal has a $100 million greenshoe and a maturity date of July 1, 2017.

Proceeds are for general corporate purposes and to fund its growth plan, including the Cover Point liquefaction project.

Morgan Stanley & Co. LLC, Wells Fargo Securities LLC, Deutsche Bank Securities Inc., RBC Capital Markets LLC, BNP Paribas Securities Corp. and Goldman Sachs & Co. are the joint bookrunning managers for the offering.

Dominion priced $1 billion of equity units in dual tranches a year ago.

The Dominion 6.125% convertibles, or the A tranche, which have a $50 par, ended the session up 2 cents at $57.97.

The Dominion 6% convertibles, or the B tranche, also with a $50 par, ended the session down a nickel at $58.24.

Dominion shares ended at $70.35, up 30 cents.

As for how the existing paper will react to the new issue, “We’ll just have to see how they open up. They don’t really trade that much. We will have to check Wednesday,” a syndicate source said.

Web.com expands

Web.com’s 1% convertibles due 2018 traded down to 103.5 bid, 104.5 offered at the end of the session with shares at $27.00. Earlier they traded down to 107.8, which was down 10.5 points, with the underlying shares down $7.53, or 22%, at $27.07.

On A 70% delta, the notes expanded 0.5 point, a trader said.

Web.com Group brought the $259 million of 1% senior convertible notes due 2018 last August.

The notes were sold at the discounted price of 98.5.

Mentioned in this article:

Dominion Resources Inc. NYSE: D

DryShips Inc. Nasdaq: DRYS

MercadoLibre Inc. Nasdaq: MELI

Palo Alto Networks Inc. Nasdaq: PANW

Scorpio Tankers Inc. Nasdaq: STNG

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.