GAIN comes in line; Hannon trades near par post-pricing; Jazz plans deal; Altbaba notes firm

By Stephanie N. Rotondo

Seattle, Aug. 17 – The convertible bond primary market continued to churn out deals on Thursday.

GAIN Capital Holdings Inc. brought an $80 million Rule 144A offering early in the day.

The deal came at par to yield 5% with an initial conversion premium of 20%. That was in line with price talk.

J.P. Morgan Securities LLC and Jefferies & Co. are the joint bookrunners.

The company also said that it was repurchasing $14.5 million shares of its common stock in connection with the convertibles sale. The purchase price of the equity is $6.83 a share, equal to Wednesday’s closing share price.

Come Thursday, the equity was losing ground, falling 48 cents, or 7.03%, to $6.35.

There didn’t appear to be much activity in the bonds, however, with one market source noting the deal’s small size.

But investors seem pleased with Hannon Armstrong Sustainable Infrastructure Capital Inc.’s $135 million of 4.125% convertible senior notes due 2022, a deal which priced late Wednesday.

At the end of the day, the issue was seen in a 99.5 to 99.75 context.

At mid-morning, a trader said the new issue had pushed up above par, though it was at 99.5 even earlier in the day.

The trader also noted that “the stock has rallied.”

The equity was up 53 cents, or 2.33%, at $23.23.

Hannon priced the issue late Wednesday, coming with an initial conversion premium of 20%.

Initial price talk was for a 3.625% to 4.125% yield and an initial conversion premium of 20% to 25%.

Deutsche Bank Securities Inc., BofA Merrill Lynch and JPMorgan are the joint bookrunners.

After the close, Jazz Pharmaceuticals plc said it intended to sell $500 million of exchangeable senior notes due 2024 via a Rule 144A offering.

Price talk is for a 1.5% yield and an initial conversion premium of 50%.

Morgan Stanley & Co. LLC is the left bookrunner.

The Dublin, Ireland-based biopharmaceutical company plans to use the funds to pay down its revolving credit facility.

Ahead of the announcement, Jazz’s equity closed at $146.01, a loss of $1.39.

Altbaba boosted by Alibaba

Over in the secondary space, Altbaba Inc.’s 0% convertible notes due 2018 were busy – and better – in the wake of better-than-expected quarterly results from Alibaba Group Holding Ltd.

A market source saw the 0% notes closing around 122.5. While that was down from around 124.25 at the open, that was still up 2 to 2.5 points day over day.

Shortly before the close, a trader placed the notes at 124.

He remarked that at that level – and with about 16 months left until maturity – the notes were trading at a 7-point premium.

“That seems like a lot for that kind of coupon,” he said, speculating that the premium “will be down to half a point in a year or so.”

Altbaba’s underlying equity was meantime up $1.55, or 2.56%, at $62.20.

Altbaba is the new name of Yahoo! Inc. following the sale of most of its businesses to Verizon Communications Inc. earlier this year. Now, the company operates as a closed-end management firm that holds a “substantial” stake in Alibaba.

As for Alibaba, its fiscal first-quarter results showed a 56% gain in revenue, driven mainly by its online sales platform.

Revenue came to ¥50.1 billion, better than the ¥47.7 billion in revenue forecast by analysts polled by Thomson Reuters.

On a dollar basis, net income nearly doubled year over year at $2.17 billion, or 83 cents a share.

Other China-based e-commerce names were lifted along with Alibaba, but that did not extend to Ctrip.com International Ltd.

For its part, Ctrip’s convertible debt was little changed, though its stock took a modest hit.

A trader saw the company’s 1% convertible notes due 2020 around “110.5 or so.” The 1.25% convertible notes due 2022 were trading “roughly” at 104.75.

Ctrip’s shares declined 95 cents, or 1.89%, to $49.19.

Prospect Capital moves

Rumors of a potential common stock dividend cut were helping push around Prospect Capital Corp.’s 4.75% convertible notes due 2020 on Thursday.

A trader quoted the issue at 100.75 bid, 100.875 offered.

That was unchanged to slightly lower than previous levels.

The company’s stock drifted in 35 cents, or 4.49%, to $7.45.

The New York-based business development company is expected to cut its stock dividend by 20% to 30%, according to a trader. That could be good for bondholders.

Currently, the bonds have a 4.4% yield to maturity, the trader said. But the stock yields 13.5%. At these levels, the convertibles are “strictly an outright play” and the stock is “useless as a convertible mechanism.” However, if the dividend is reduced, “that disparity is not as bad.”

Mentioned in this article:

Altbaba Inc. Nasdaq: AABA

Ctrip.com International Ltd. Nasdaq: CTRP

GAIN Capital Holdings Inc. NYSE: GCAP

Hannon Armstrong Sustainable Infrastructure Capital Inc. NYSE: HASI

Jazz Pharmaceuticals plc Nasdaq: JAZZ

Prospect Capital Corp. Nasdaq: PSEC

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