Chesapeake plans new issue; DTE Energy comes rich; Recipharm prices; Ship Finance eyed

By Stephanie N. Rotondo

Seattle, Sept. 29 – The new issues continued to flow into the convertible bond market on Thursday.

Chesapeake Energy Corp., for one, said it was offering $850 million of 10-year convertible senior notes via a Rule 144A offering.

One market source said pricing was reduced to 5.5% to 6%, while another said he heard the deal would be increased.

In the gray market, the convertibles were seen trading at 101.375 bid, 101.875 offered.

Though pricing was expected Thursday, details were not available as of press time.

The company plans to use proceeds for general corporate purposes, which may include debt repurchases and repayment of near-term maturities.

Meanwhile, the market was also waiting for DTE Energy Co.’s $600 million sale of mandatory convertible tangible equity units, a deal first announced late Wednesday.

Pricing came late in the day, with the units coming at par to yield 6.5% with a 25% initial conversion premium. Price talk was for a yield of 6.25% to 6.75% and a conversion premium of 20% to 25%, according to a market source.

The $50-par units will hold a contract to purchase common stock and a 1/20th, or 5%, undivided beneficial ownership interest in a $1,000-par 2016 series C remarketable senior note due 2024.

The reference price is $93.05 per share, with a threshold appreciation price of $116.31 per share.

Under the stock purchase contract, holders will be required to purchase a variable number of the company’s common shares no later than Oct. 1, 2019.

Proceeds will be used for the purchase of midstream natural gas assets.

On the international stage, Recipharm AB said it sold SEK 1 billion of 2.75% senior unsecured convertible bonds due 2021, with a conversion premium of 30%.

Price talk came at the cheap end of the 2% to 2.75% coupon talk and 30% to 35% premium talk.

The Swedish drug manufacturer said it would use funds from the sale for growth opportunities.

On tap for Friday pricing was a $200 million offering of convertible senior notes due 2021 from Ship Finance International Ltd.

The notes are expected to have a conversion premium of 20% to 25%, with talk on the coupon at 5.25% to 5.75%.

Pricing is expected before the market opens on Friday. A group investor call was held Thursday after the market closed.

Jefferies LLC, ABG Sundal Collier and Morgan Stanley & Co. LLC are the joint bookrunners. Seaport Global Securities LLC and Clarksons Platou Securities Inc. are co-managers.

Proceeds will be used for general corporate purposes, including working capital and the repurchase of all or a portion of its existing $350 million of 3.25% convertible notes due 2018.

Those notes carry a conversion price of $21.945 a share. The stock finished Thursday’s session at $14.51, off 6 cents.

Also in the works is a $75 million sale of convertible senior notes due 2019 from Arbor Realty Trust Inc.

There is an $11.25 million over-allotment option.

J.P. Morgan Securities LLC, JMP Securities and BofA Merrill Lynch are the joint bookrunners.

NXP in talks with Qualcomm

NXP Semiconductors NV’s 1% convertible notes due 2019 were “cheapening on a hedge basis, with the stock up 15%,” a market source said Thursday, on news Qualcomm Inc. was looking to acquire the chipmaker.

The source deemed the debt up over 2 points on a hedge basis.

Another source placed the issue around 114.5, a gain of 4.5 points.

“[The] bonds have a bad takeover matrix and are -$2 dollar nuke,” yet another source said.

As for the equity underlying the debt, it closed up $13.88, or 16.88%, at $96.12.

The over $30 billion deal is expected to take two to three months to complete, assuming an official agreement is reached.

As of Thursday’s close, NXP had a market cap of $32.6 billion. Qualcomm came in at $99.4 billion.

Mentioned in this article:

Arbor Realty Trust Inc. NYSE: ABR

Chesapeake Energy Corp. NYSE: CHK

DTE Energy Co. NYSE: DTE

NXP Semiconductors NV Nasdaq: NXPI

Recipharm AB Stockholm: RECI-B

Ship Finance International Ltd. NYSE: SFL

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