American Realty tranches better after sharp losses; Euronet, American Energy to price

By Rebecca Melvin

New York, Oct. 30 – American Realty Capital Properties Inc.’s convertibles were slightly better Thursday after dropping sharply on Wednesday after the New York-based real estate investment company announced accounting errors at the company.

The real estate company said certain amounts related to adjusted funds from operations were overstated and not corrected when discovered. The Securities and Exchange Commission has begun an investigation into the matter, according to reports.

“A lot of people are looking at this now, across the capital structure,” a New York-based trader said.

Otherwise, market players said convertibles were quiet, with no particular trends marking the session.

Twitter Inc.’s convertibles lagged further in early trade two days after the San Francisco-based social media company reported lower user growth statistics that disappointed investors. But shares that were down another 2.3% in the early going following Tuesday’s 10% drop recouped most of the day’s losses by the close.

Twitter’s 0.25% convertibles due 2019, or the A tranche, were seen Thursday morning at 90.853 versus a stock price of about $41.15, according to Trace data. That was down from 92.50 versus an underlying share price of $42.50 on Tuesday. Twitter’s 1% B tranche was seen at about the same level, compared to 92.25 on Tuesday. Shares ended down 0.7%.

A couple of Chinese internet shares were in trade. Ctrip.com International Ltd.’s 1.25% convertibles were seen at 104 bid, 104.75 offered near the close, a New York-based trader said. That was little changed on an outright basis, with shares up 2%. In the same space, SINA Corp.’s 1% convertibles due 2019 were seen last at 91.375 bid, 91.875 offered with shares 0.9%.

Both bonds were trading in the morning, but less active in the afternoon, a New York-based sellsider said of Ctrip and SINA.

BPZ Resources Inc. was also a name during the session and its 8.5% convertibles due 2017 changed hands at 82.25, which was down from a previous level of 84.

Ahead of the market open, Euronet Worldwide Inc. launched a deal for $350 million of 30-year convertible senior notes that were planned to price after the market close to yield 1.375% to 1.875% with an initial conversion premium of 30% to 35%.

Also in the primary market, American Energy Permian Holdings LLC, an affiliate of American Energy – Permian Basin LLC and American Energy Partners LP, said late Wednesday it plans to price $800 million of eight-year exchangeable junior subordinated notes in a private offering.

The pre-initial public offering convertible deal for American Energy Permian was said to be popular and oversubscribed, but details on timing and price talk for the deal were not immediately available. Joint bookrunners are Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., Jefferies & Co. and Morgan Stanley & Co. LLC.

In the broader markets, equities rallied into the market close even as a significant technical glitch hit the New York Stock Exchange.

Earnings were mostly positive, and the Commerce Department said U.S. gross domestic product rose at an annual rate of 3.5% for the third quarter, which was above forecasts for GDP of 3.1%.

American Realty slightly better

American Realty’s 3.75% convertibles due 2020 were last at 93 bid, 93.75 offered with shares down nearly 6%. That was up from the 91.5 posted late on Wednesday when the bonds fell nearly 10 points.

American Realty’s 3% convertibles due 2018 were quoted at 94.25 bid, 95.75 offered near the close, which was a bid better from a drop to the lower 90s from the upper 90s on Wednesday.

The 3% bonds saw a pretty wide spread and hadn’t traded actively toward the end of the session, a sellsider said.

American Realty shares were down 58 cents, or 5.8%, to $9.42, extending a 19% drop on Wednesday.

The sellsider said it wasn’t a notable trend that market players were moving out of American Realty into other real estate investment trust names.

A second trader said, “The bonds were slightly better,” and that “People were looking at the bonds in light of what happened.”

“There’s no delta to them at this point; they are being looked at as a credit-bond floor type trade,” the trader said.

On Wednesday, American Realty shares fell as much as 37% intraday before paring losses for a $2.38, or 19%, drop to $10.00.

The company said certain amounts related to non-controlling interests were incorrectly included in adjusted funds from operations, and chief financial officer Brian Block and chief accounting officer Lisa McAlister have resigned because the accounting mistakes were not corrected.

American Realty owns and acquires single-tenant freestanding commercial real estate.

Its convertibles have traded up in recent weeks along with a climb in the underlying shares since early this month.

Euronet to price

Euronet, a Leawood, Kan.-based electronic payments provider, planned to price $350 million of 30-year convertible senior notes after the market close that were talked to yield 1.375% to 1.875% with an initial conversion premium of 30% to 35%, according to a syndicate source.

The Rule 144A deal has a $52.5 million greenshoe and was being sold via bookrunners BofA Merrill Lynch and Wells Fargo Securities.

The notes are non-callable until April 5, 2018 and then are provisionally callable if shares exceed the conversion price by 130%.

Holders can put the bonds in October of 2020, 2024, 2029, 2034 and 2039.

Beginning on Oct. 1, 2020, holders will receive contingent interest for certain periods if the trading price of the notes exceeds a certain threshold.

Proceeds will be used together with cash on hand if necessary to fund the repurchase of up to $80 million shares of common stock and to repay borrowings outstanding under its revolving credit facility. Remaining proceeds will be used for general corporate purposes.

The share repurchases being made with proceeds of the deal are in addition to the company’s previously announced $100 million share repurchase program.

American Energy plans offer

American Energy Permian Holdings was expected to price $800 million of eight-year exchangeables in an upcoming pre-IPO offering. There was no timing and talk available from bookrunners, including Credit Suisse Securities, Goldman Sachs, Jefferies & Co. and Morgan Stanley.

Proceeds will be contributed to American Energy – Permian Basin and will be used to fund pending acquisitions, accelerate development drilling, pay related fees, repay all outstanding borrowings under its revolver and for general corporate purposes.

A syndicate source said that further details on the offering were not yet available.

Oklahoma City-based American Energy is involved in onshore U.S. unconventional resource plays.

Mentioned in this article:

American Realty Capital Properties Inc. Nasdaq: ARCP

BPZ Resources Inc. NYSE: BPZ

Ctrip.com International Ltd. Nasdaq: CTRP

Euronet Worldwide Inc. Nasdaq: EEFT

SINA Corp. Nasdaq: SINA

Twitter Inc. Nasdaq: TWTR

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