NXP Semiconductors launches and prices $1 billion deal; secondary market mostly quiet

By Rebecca Melvin

New York, Nov. 24 – NXP Semiconductors NV was in focus on Monday as market players weighed valuations of the Dutch semiconductor components company’s $1 billion offering of five-year convertible senior notes, which priced after the market close at the cheap end of talked terms.

The NXP deal was looking a little rich to investors ahead of final terms being fixed, according to several sources.

NXP Semiconductors shares rose almost 2% during the session.

It didn’t appear that the new deal pressured market players to sell existing bonds to make room for the new paper, a market source said.

“Outrights have more cash, so there is less selling than I would have expected. They don’t need to sell,” a New York-based trader said.

In the semiconductor space, Intel Corp. was trading actively, with the Santa Clara, Calif.-based chip giant’s 2.95% convertibles seen up 0.7 point at 130.23, according to Trace data. Shares were also higher after positive growth comments in the latest issue of Barron’s magazine.

Micron Technology Inc.’s 3% convertibles due 2043 were also in trade and up in line with the underlying shares of the Boise, Idaho-based chipmaker.

Elsewhere in the technology sector, issues such as LinkedIn Corp.’s 0.5% convertibles due 2019 were in trade at about 104 and Twitter Inc.’s 0.25% convertibles changed hands at 90.28. But trading action in those names was not “meaningful,” a New York-based trader said.

BioMarin Pharmaceutical Inc. traded up in line with the underlying shares after the Novato, Calif.-based biopharmaceutical company said it has agreed to buy Dutch pharmaceutical company Prosensa Holding NV, a trader said.

BioMarin’s 1.5% convertibles due 2020 were seen trading at 119 to 120.4, which was up a point or so outright, according to Trace data.

BioMarin’s 0.75% convertibles due 2018 was seen trading at 117, which was up from 115 on Friday, Trace said.

United Technologies Corp.’s $1.1 billion of 7.5% equity units, which mature next year, didn’t trade much after news that the Hartford, Conn.-based building and aerospace technology company’s chief executive officer, Louis Chenevert, unexpectedly stepped down and was replaced by Gregory Hayes, who was previously chief financial officer.

The United Technologies mandatories are “super rich and are basically retail, outright owned, a New York-based trader said, adding that they don’t generally trade actively and didn’t appear to have traded significantly on Monday.

United Technologies shares were off 1.4%.

Overall, the secondary market was described as quiet to start the holiday shortened week. Financial markets will be closed on Thursday for Thanksgiving, with an early close for both stock and bond markets on Friday.

The week also marks the end of November. But there didn’t appear to be much by way of month end activity going on Monday.

A trader said that the end of October had brought more month end trading activity than the end of this month.

“But this was a better month, so we are not seeing that much,” the trader said referring to fund returns for the month.

NXP prices at the cheaps

NXP priced $1 billion of five-year convertible senior notes late Monday at par to yield 1% with an initial conversion premium of 35%, a syndicate source said.

Ahead of final terms being fixed NXP looked a bit rich at the midpoint of terms, according to some sources.

Using a credit spread of 275 basis points over Libor and a 30% volatility, the deal looked worth about 99.3 at the midpoint of talk, a Connecticut-based trader said.

A second source concurred with that credit spread but said he thought the volatility input should be higher.

The deal was talked at a coupon of 0.5% to 1% and an initial conversion premium of 35% to 40%.

The chip maker makes auto keyless entry chips and security identification chips.

The deal is coming concurrently with convertible note hedge and warrant transactions.

The majority of the notes are likely to be sold under Rule 144A, the syndicate source said.

About $60 million of proceeds will be used to fund the net cost of those transactions, up to €225 million will be used to repay loans to subsidiaries, up to $250 million will be used to repurchase common stock – with up to $150 million to be purchased from purchasers of the notes in privately negotiated transactions and in open market transactions. Remaining proceeds will be used for general corporate purposes, including additional share repurchases and potential acquisitions.

The Rule 144A and Regulation S deal has a $150 million over-allotment option and was being sold via joint bookrunners Morgan Stanley & Co. LLC, Barclays, BofA Merrill Lynch, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc.

NXP is based in Eindhoven, the Netherlands.

Standard & Poor assigned its BB- issue rating to the proposed convertibles.

Mentioned in this article:

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Intel Corp. Nasdaq: INTC

LinkedIn Corp. Nasdaq: LNKD

Micron Technology Inc. NYSE: MU

NXP Semiconductors NV Nasdaq: NXPI

Twitter Inc. Nasdaq: TWTR

United Technologies Corp. NYSE: UTX

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