Cheniere expands on hedge; new Gogo upsized, trades flattish; three deals join calendar

By Rebecca Melvin

New York, March 4 – Cheniere Energy Inc.’s newly priced 4.25% convertibles traded up on their debut Wednesday on both an outright and dollar-neutral basis after the Houston-based energy company priced $625 million of the 30-year notes at a price tag of 80 each.

The new Cheniere notes were trading actively and quoted at 82.75 versus an underlying share price of $78.75.

The Cheniere shares opened lower and closed down $2.97, or 3.7%, at $78.43.

Also debuting on Wednesday were Gogo Inc.’s new 3.75% convertible notes, which edged up with shares, after the Itasca, Ill.-based in-flight internet and entertainment provider priced an upsized $340 million of the five-year notes at the cheap end of talked terms.

The new Gogo bonds were seen to have traded at 100.25, according to Trace data. Gogo shares were up 10 cents at $19.57.

The deal was originally expected to be $300 million in size.

Cal Dive International Inc.’s 5% convertibles due 2017 were not seen to have traded after the Houston-based offshore oil and natural gas services company filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware.

The Cal Dive convertibles “haven’t traded in months,” a Connecticut-based trader said. The last trade was at about 15, he said.

Apart from new issues, the session was “pretty quiet,” a New York-based trader said.

Convertibles issues played for volatility have come in in recent sessions as have issues in the technology and health care sectors, the trader said, and those trends remained in place on Wednesday.

But the energy sector has been “better to buy,” as have some of the credit sensitive areas like business development corporations, he said.

Market players seem to be reaching for yield and looking for yield in shorter durations, he said.

In addition, many were expecting new paper.

“I think most people are buckling down for more issuance after earnings,” the trader said.

In fact, a trio of new deals materialized after the market close, with final terms expected after the market close on Thursday.

Horizon Pharma plc plans to price $300 million exchangeable senior notes, InterDigital Inc. plans to price $275 million of five-year convertible senior notes and Consolidated-Tomoka Land Co. plans to price $75 million of five-year convertible senior notes.

New Cheniere expands

Cheniere’s new 4.25% convertibles due 2045 traded up to 82.75 versus an underlying share price of $78.99, a Connecticut-based trader said.

That represented an expansion on a dollar-neutral basis of a couple of points, a second trader said.

The very long dated bond priced at 80, which is a way to structure a long piece of paper so as to add more yield without boosting the coupon, another Connecticut-based trader said.

The original issue discount was at 80; it wasn’t a reoffered price.

The deal was placed directly via Lazard Freres & Co. LLC, and it isn’t the only deal that Lazard has priced this way. A Micron Technology Inc. exchangeable was similarly structured and priced at 90, a trader said.

It was structured that way as a way to boost yield without boosting the coupon, the trader said.

Cheniere is a Houston-based energy company focused primarily on LNG-related businesses. It owns and operates the Sabine Pass LNG terminal and Creole Trail Pipeline in Louisiana.

Cheniere priced $625 million of the 30-year senior notes with a 70% initial conversion premium.

Proceeds, net of the original issue discount, are expected to be about $500 million and will be used for general corporate purposes.

New Gogo edges up

Gogo’s newly priced 3.75% convertibles traded a little over par at 100.25, in line with shares that were a little higher, a trader said.

“Borrow was nonexistent, and apart from some swap facility, it was tough to be active there,” said a trader, who was not active in the new deal.

The deal had looked cheap on a valuation basis at the midpoint of price talk.

Joint bookrunners were J.P. Morgan Securities LLC and BofA Merrill Lynch.

A portion of net proceeds will be used to fund the cost of repurchasing stock under the forward stock purchase transactions. Remaining proceeds will be used for working capital and other general corporate purposes, including costs associated with developing next generation technology and possibly the acquisition of additional spectrum.

Horizon Pharma launches

Dublin, Ireland-based Horizon Pharma is a specialty pharmaceutical company. Its subsidiary Horizon Pharma Investment Ltd. plans to price $300 million senior notes exchangeable into Horizon Pharma.

The deal was talked to yield 2.25% to 2.75% with an initial conversion premium of 27.5% to 32.5%.

The Rule 144A deal has a $45 million greenshoe and was being sold via Morgan Stanley & Co. Ltd., Jefferies & Co., Cowen & Co., UBS Investment Bank and Guggenheim Securities.

Proceeds will be used to fund general corporate purposes and future acquisitions or investments in complementary businesses and products or product candidates.

InterDigital plans deal

InterDigital, a Wilmington, Del.-based mobile technology company, plans to price $275 million of five-year convertible senior notes after the market close Thursday that were talked to yield 1.25% to 1.75% with an initial conversion premium of 32.5% to 37.5%, according to market sources.

The Rule 144A deal has a $41 million greenshoe and was being sold via joint bookrunners Barclays and Goldman Sachs & Co.

The bonds are non-callable with no puts. There is takeover protection and full dividend protection in the form of a conversion rate adjustment for any quarterly dividend payment above $0.20 per share.

In connection with the pricing of the notes, InterDigital plans to enter into convertible note hedge and warrant transactions, or a call spread, with one or more initial purchasers of the notes.

Proceeds will be used to repurchase up to $50 million shares of common stock concurrently with the pricing of the bonds as well as for general corporate purposes, which may include repurchasing debt, and to pay the net cost of the call spread.

Consolidated-Tomoka to price

Daytona, Fla.-based Consolidated-Tomoko, a real estate development company, plans to price $75 million of five-year convertible senior notes after the market close Thursday that were talked to yield 4.25% to 4.75% with an initial conversion premium of 22.5% to 27.5%.

The Rule 144A deal has a $15 million greenshoe and was being sold via joint bookrunners Deutsche Bank Securities Inc. and BMO Capital Markets.

The bonds are non-callable with no puts. There is takeover protection and full dividend protection in the form of a conversion rate adjustment.

Proceeds will be used to repay borrowings under the company’s credit facility, to fund future investments in income-producing assets and for general corporate purposes, including possible stock buybacks under the company’s share repurchase program.

Mentioned in this article:

Cheniere Energy Ltd. NYSE: LNG

Consolidated-Tomoka Land Co. NYSE: CTO

Gogo Inc. Nasdaq: GOGO

Goodrich Petroleum Corp. NYSE: GDP

Horizon Pharma plc Nasdaq: HZNP

InterDigital Inc. Nasdaq: IDCC

Micron Technology Inc. NYSE: MU

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