New Prospect Capital adds from reoffered price; some tech names rebound; James River slips

By Rebecca Melvin

New York, April 8 - Prospect Capital Corp.'s $400 million of 4.75% six-year convertible senior notes, which priced ahead of the market open on Tuesday, traded up to about 99 from their discounted reoffered price of 97.75 during the session. Shares ended off by a penny.

"Initially they were not that well-loved as there are six of these already," a New York-based trader said of the new Prospect convertibles and the company's existing convertibles. But "they started to outperform this afternoon," he said.

One of the existing issues of the New York-based venture capital and private equity firm - the Prospect 5.875% convertibles - traded down a point or more on an outright basis, sources said.

Back in established issues, some technology names worked to recoup losses tallied recently as shares recovered ground.

Workday Inc.'s convertibles were trading better and were seen to have expanded about 0.75 point as shares of the Pleasanton, Calif.-based human resources and financial cloud computing company gained 4%.

Proofpoint Inc. saw its convertibles also trading better on a hedged basis. The bonds had come in with the stock down 10% on Monday.

Vipshop Holdings Ltd.'s 1.5% convertibles due 2019, which priced March 11, were seen jumping to about 99 from 94 or 95 as shares regained 11%.

But Cornerstone OnDemand Inc. was under pressure with the shares of the Santa Monica, Calif.-based cloud talent management company slumping about 10% on Tuesday. Sources queried hadn't seen a market in the Cornerstone 1.5% convertibles due 2018, however.

James River Coal Co.'s 10% convertibles were seen in the 10 bid, 12 offered range, which was down a coupon of points, a Connecticut-based trader said, after the Richmond, Va.-based coal company and its subsidiaries filed Chapter 11 bankruptcy late Monday.

Prospect Capital adds

Prospect Capital's newly priced 4.75% convertibles traded last at about 98.875 bid, 99.25 offered. A second level provided was 98.625 bid, 99.125 offered. The new paper earlier had been 98 to 98.25 bid with shares lower. But the shares ended down only a penny at $10.77.

The Prospect convertibles had been reoffered at a 97.75 discount to par.

The deal was oversubscribed and pricing was able to be concluded on an overnight basis, avoiding a strong reaction in the shares, a syndicate source said. There was a lot of demand for the paper, he said.

Prospect priced $400 million of the 4.75% six-year convertible senior notes with an initial conversion premium of 15%.

The Rule 144A deal came at the fixed price points initially talked. Barclays was the bookrunner for the deal.

"There was strong demand and the book was oversubscribed allowing us to price before the open," the syndicate source said.

The notes are six-year bullets with no calls or puts. There is standard dividend protection and takeover protection via a make-whole. The paper will be physically settled.

Proceeds will be used to pay down an outstanding credit facility balance, to maintain balance sheet liquidity, including investments in high quality, short-term debt, and to make long-term investments.

Prospect's existing issues are a little shorter dated, allowing the company to extend its maturities slightly.

The company's 5.875% convertible senior notes due 2019 were initially priced in December 2012. Those notes were reoffered at 97.25. Last week, they changed hands at 105.75, according to Trace data, and early Tuesday they traded at 104.625 to 104.75.

Workday, Proofpoint expand

Workday's 0.75% convertibles and 1.5% convertibles were starting to expand relative to the shares on Tuesday, a market source said. Workday shares added $3.06, or 3.9%, to $81.20. The bonds were seen at 120.75 versus an underlying share price of $81.00, a New York-based trader said, which represented an expansion on a dollar-neutral, or hedged, basis of 0.75 point.

Proofpoint's convertibles had a similar move. That paper was seen at 112.75 with the underlying shares at $34.00. It was 0.75 point better, the trader said. The bond had contracted on Monday on a 10% downward move in the shares, he said.

Proofpoint shares edged up 55 cents, or 1.6%, to $34.10 on Tuesday. The Sunnyvale, Calif.-based company provides data security services security.

Overall, it was a little bit better to buy across the board, a trader said. "Lower volume, stronger basis."

Growth stories like Workday and Proofpoint were strengthening with the stocks.

"Bonds are starting to expand," he said.

James River a little weaker

James River's 10% convertible senior notes, of which about $123 million priced in May 2013, were seen at 10 bid, 12 offered on Tuesday after the company filed for bankruptcy protection.

The 10% convertibles were issued in exchange for about $243 million of the company's existing 4.5% senior convertible notes due 2015 and 3.125% senior convertible notes due 2018.

James River shares plunged 45 cents, or 63%, to $0.2641.

The bonds were down a couple of points, a Connecticut-based trader said, but the filing for bankruptcy was no surprise.

The company failed to make the interest payment due April 1 on its 7.875% senior notes due 2019. The company said it was filing to continue implementing a comprehensive turnaround plan aimed at its challenges in the changing coal mining industry. The company expects its mining operations and customer shipments to continue in the ordinary course throughout the restructuring process.

James River will enter into a $110 million debtor-in-possession financing facility to be provided by "several large financial funds."

Upon court approval, the company said the new financing and cash generated from James River's ongoing operations will be used to support the business during the restructuring process.

Mentioned in this article:

Cornerstone OnDemand Inc. Nasdaq: CSOD

James River Coal Co. Nasdaq: JRCC

Proofpoint Inc. Nasdaq: PFPT

Prospect Capital Corp. Nasdaq: PSEC

Vipshop Holdings Ltd. Nasdaq: VIPS

Workday Inc. Nasdaq: WDAY

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