VeriSign down in line with shares; NQ Mobile, SINA expand on hedge; YY, Emerald Oil on tap

By Rebecca Melvin

New York, March 17 - VeriSign Inc.'s convertibles dropped 8 or 9 points outright on Monday but were flat on a hedged basis after news that the U.S. government plans to relinquish oversight of the internet's domain-naming system by September 2015. VeriSign is a registry of Web domain names.

Chinese internet-related companies were also moving around, a New York-based trader said, quoting smartphone software maker NQ Mobile Inc.'s convertibles higher on an outright basis and also higher on a hedged, or dollar-neutral, basis with shares of the Beijing- and Dallas-based company up 11%.

The convertibles of SINA Corp., a Shanghai-based online media company, were also sharply higher, and the SINA 1% convertibles, which the company priced late last year, were seen to have expanded about a point on a dollar-neutral basis, the trader said.

Gold-related names were also a feature of the day's session with the convertibles holding up well despite weaker gold prices, a New York-based trader said.

Newmont Mining Corp.'s 1.625% convertibles due 2017 were up about 0.25 point on a dollar-neutral basis and were last seen at 109.625 bid, 110.375 offered with the underlying shares of the Denver-based gold and copper mining company at $25.80.

Newmont's very short-dated 1.25% convertibles due July 2014 traded at 100.24, which was little changed, according to Trace data.

Detour Gold Corp.'s 5.5% convertibles due 2017 traded in line with the underlying shares of the Toronto-based gold exploration and development company. The Detour paper was 95 bid, 95.75 offered with the underlying shares at $11.59.

B2Gold Corp.'s 3.25% convertibles "are holding up extremely well," the trader said, quoting the paper at 108.75 bid, 109.75 offered with shares of the Vancouver, B.C.-based gold and copper miner at $3.02. That was flat on a dollar-neutral basis with the shares down 2.3%.

Goldcorp Inc. shares were down 2.5%, and the convertibles were at 100.5625 bid, 100. 6875 offered, which was flat on a dollar-neutral basis.

Elsewhere, the secondary market was quiet.

"Outside of independent news flow there was really nothing," a New York-based trader said.

The convertibles primary market remained quiet during the session, but after the market close, two deals were launched. They included YY Inc., with a $400 million offering of five-year convertible senior notes seen pricing after the market close Tuesday. The Guangzhou, China-based social media company withdrew a proposed $250 million offering of five-year convertible senior notes in November.

Also launching a deal was Emerald Oil Inc., which planned to price $125 million five-year convertible senior notes after the market close Tuesday.

VeriSign down in line

VeriSign's 3.25% convertibles due 2037 were seen near the end of the session Monday at around 159 with the underlying shares at $51.50, a New York-based trader said.

That was down in line with lower underlying shares, or flat on a dollar-neutral basis.

The bonds traded down early Monday to 154 bid, 156 offered from the upper 160's, with shares lower by 7% to 8% at around $50.90.

Shares recovered a bit of ground late in the day, and so did the bonds. Shares of the Reston, Va.-based registry of Web domain names ended down $3.17, or nearly 6%, at $51.68.

Weighing on the securities was the government's announcement Friday that it will give up oversight of the domain-naming system.

VeriSign said early Monday that the announcement doesn't impact its .com and .net domain name business.

But also on Monday, Cowan & Co. downgraded VeriSign shares to "market perform" from "outperform" and cut its price target to $49.00 from $63.00, citing the National Telecommunications and Information Administration's announcement.

"There were some momentum sellers of those, and large, deep value buyers," a New York-based trader said of the VeriSign convertibles.

"They nuked straight down on a 95," he said, referring to a 95% delta hedge. "Hedge funds will start picking away on this one."

On Friday, the NTIA said the U.S. will seek a new structure for the domain naming system that involves groups that have a stake in the management of the internet, such as the Internet Engineering Task Force.

NQ Mobile, SINA add on hedge

Both NQ Mobile, a smartphone software maker, and SINA, a social media company, expanded about a point on a dollar-neutral basis amid strong stock gains.

NQ Mobile's 4% convertibles due 2018 traded up to about 95 with the underlying shares at about $20.00, a trader said.

That was up from 89 bid, 90 offered previously and better on swap by about a point, assuming a 75% to 85% delta, he said.

NQ shares jumped $1.97, or nearly 11%, to $20.25.

News that the company is teaming up with Indonesia's Smartfren Telecom company wasn't necessarily behind the move, a trader said. Rather it was likely a combination of factors including short covering.

"That stuff is nothing; there is something else going on. I don't know what it was, but it's something else: you can take your pick, a short squeeze, earnings is coming out, or something," the trader said.

The NQ convertibles fell to near 40 last fall amid allegations of fraud.

SINA's 1% convertibles due 2018 were seen last at 98.125 bid, 98.625 offered, with shares of the Shanghai-based online media company rising $4.24, or 6.6%, to $68.83.

YY to price

YY is offering $400 million of five-year convertible senior notes at a 1.75% to 2.25% coupon and a 35% to 40% initial conversion premium, according to market sources.

The Rule 144A and Regulation S deal has a $60 million greenshoe and was being sold via bookrunners Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co International plc.

Investors may put the bonds on April 1, 2017. Holders can also put the bonds if certain tax-related events occur and in the event of a change of control.

The notes are non-callable for life except if certain tax-related events occur.

Proceeds will be used for general corporate purposes, including working capital and potential acquisitions of complementary businesses.

YY is an online music, entertainment and gaming company.

Emerald Oil to price

Emerald Oil, a Denver-based independent oil and natural gas exploration and production company, plans to price $125 million five-year convertible senior notes to yield 1.75% to 2.25% with a 32.5% to 37.5% initial conversion premium, according to market sources.

The Rule 144A offering has a greenshoe for up to an additional $18.75 million of notes and was being sold via Credit Suisse Securities (USA) LLC and Barclays as joint book-running managers.

The notes are non-callable. They will be settled in shares. They also have standard change-of-control protection with a make-whole table and anti-dilution adjustments and dividend protection via adjustment to the conversion rate for any dividends paid.

Proceeds will be used to repay all of the outstanding borrowings under a revolving credit facility and for general corporate purposes, including funding a portion of the company's drilling and development program and potential acquisitions.

Mentioned in this article:

B2Gold Corp. NYSE: BTG

Emerald Oil Inc. NYSE: EOX

Detour Gold Corp. NYSE: DGC

GoldCorp Inc. Toronto: GG

Newmont Mining Corp. NYSE: NEM

NQ Mobile Inc. NYSE: NQ

SINA Corp. Nasdaq: SINA

VeriSign Inc. Nasdaq: VRSN

YY Inc. NYSE: YY

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