Golden Star edges up on outright basis; Citrix Systems trades in line ahead of earnings

By Rebecca Melvin

New York, July 26 – Convertibles players were eyeing earnings reports on Tuesday while equity markets traded narrowly mixed as a two-day Federal Reserve policy meeting got underway.

Golden Star Resources Ltd.’s newly priced $65 million of convertibles traded up slightly on an outright basis after the Littleton, Colo.-based gold miner priced the five-year senior notes at the cheap end of talked terms.

The Golden Star Resources 7% convertibles due 2021 traded between 100.25 bid, 100.75 offered and were seen at 100 to 101 at the close. They were not moving on delta as the stock borrow in the name is limited, a syndicate source said.

Also in the mining sector, Stillwater Mining Co.’s convertibles were seen up about 0.25 point to 118.25 as the underlying stock gained 56 cents, or 4.4%, to $13.44 during the session.

Blackhawk Network Holdings Inc.’s convertibles moved up in active trade for a third straight day since the Pleasanton, Calif.-based prepaid, gift card and payment services company priced $460 million of the 5.5-year convertibles at the rich end and beyond the rich end of talked terms late Thursday.

The Blackhawk 1.5% convertibles due 2022 gained another 0.8 point to 104.558 in heavy volume, according to Trace data. Blackhawk’s common shares also rose again, ending the session up 46 cents, or 1.3%, at $37.04.

Back in established issues, Allegheny Technologies Inc.’s convertibles jumped as the underlying shares of the company surged on better-than-expected earnings for the Pittsburgh-based specialty metal company.

Allegheny’s 4.75% convertibles due 2022 jumped more than 15 points to 135 from around 119 and change. Allegheny shares rose $2.895, or 19%, to $18.025.

The Pittsburgh-based specialty steel company reported a net loss of 18 cents per share, smaller than the loss of 37 cents per share expected by analysts. Revenue was $810.5 million, which above analysts' estimates of $792.8 million.

Citrix Systems Inc.’s convertibles traded in line Tuesday ahead of the Fort Lauderdale, Fla.-based cloud computing company’s quarterly earnings report expected after the market close.

The Citrix 0.5% convertibles due 2019 were seen at 117.25, up from 117 on Monday and 114 to 116 on Friday. Citrix shares were up about 0.4% during the session but gained steam into the close, ending the day up 1.2%. After the market close, a reverse merger with LogMeIn Inc. was announced.

Also after the market close, Twitter Inc. reported earnings that disappointed, sending its common shares down 9% in after-hours trading. Twitter convertibles were not heard in trade on Tuesday.

In the broader markets, equities were narrowly mixed. The Dow Jones industrial average slipped 19.31 points, or 0.1%, to 18.473.75. But the S&P 500 stock index closed up 0.7 point to 2,169.18 and the Nasdaq Composite stock market added 12.42 points, or 0.2%, at 5,110.05.

New Golden Star adds outright

Golden Star’s newly priced 7% convertibles due 2021 were better to buy, meaning that there were more bids in the market than there were offers to sell the new paper.

The new convertibles had traded between 100.25 and 100.75. Shares of the mining company were up about 2%.

“There was limited supply and people were looking to buy,” a syndicate source said.

The paper traded on an outright basis only, although there were some market players tracking the pricing on a light delta, the source said.

The new bonds were not trading on a hedged basis because the stock borrow is “very challenging” and also because most of the participants in the deal were looking to hold the bonds for the long haul.

Most of the deal went to two holders of the company’s older 5% convertible bonds due 2017 as an exchange.

The Golden Star 5% convertibles traded at 100.5 on Tuesday, according to Trace data.

Concurrently with the new deal, Golden Star priced $30 million of common stock, and the deal was priced based on a share price of $0.75 per share. But prior to the launch of the offerings the stock was around $1.00.

It is likely that the shares will drift back up to the $1.00 level, a source said.

The new notes, which were talked to yield 6.5% to 7% with a 20% to 25% premium, are non-callable for three years and then provisionally callable if pricing of the common stock exceeds 130% of the conversion price.

There are no investor puts. The notes settle in stock, cash or a combination of stock and cash at the issuer’s option.

Proceeds of the offerings are being used to repurchase debt, including the convertibles and a term loan with Ecobank Ghana Ltd. Remaining funds will be used for general corporate purposes. The company will not receive any cash proceeds from the exchange.

Golden Star is a Littleton, Colo.-based gold mining firm with share listings on the New York Stock Exchange, Toronto Stock Exchange and Ghana Stock Exchange.

Citrix trades in line

Citrix’s 0.5% convertibles traded around 117 on Tuesday. The trades occurred on an outright basis, a New York-based trader said.

“They seem like they are in line or up a tiny bit on the day,” the trader said.

Citrix shares closed the session up $1.05, or 1.2%, at $89.33.

After the market close, LogMeIn Inc. announced that it will combine with Ctirix’s GoTo business in a reverse-merger valued at $1.8 billion. The combined company is expected to have revenue of more than $1 billion a year.

For its second quarter, Citrix reported revenue of $843 million, which was up 6% year over year. Net income for the second quarter of fiscal year 2016 was $121 million, or $0.77 per diluted share, compared to $103 million, or $0.64 per diluted share, for the second quarter of fiscal year 2015. Non-GAAP net income for the second quarter of fiscal year 2016 was $188 million, or $1.20 per diluted share, compared to $163 million, or $1.00 per diluted share, for the second quarter of fiscal year 2015.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Blackhawk Network Holdings Inc. Nasdaq: HAWK

Citrix Systems Inc. Nasdaq: CTXS

Golden Star Resources Ltd. NYSE: GSS

Stillwater Mining Co. NYSE: SWC

Twitter Inc. Nasdaq: TWTR

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