Nuance flat to higher on hedge; BGC Partners mostly flat; Intelsat, Liberty launch deals

By Rebecca Melvin

New York, April 2 - Nuance Communications Inc. was higher outright, but flat to a little higher on a hedged basis Tuesday, as shares jumped on word that billionaire investor Carl Icahn has taken a 9.2% stake in the Burlington, Mass.-based speech-recognition software firm.

BGC Partners Inc. was also higher outright, but flat on a hedged basis against a 48% surge in the underlying shares, after word that the New York-based inter-dealer broker agreed to sell its electronic Treasury trading platform to Nasdaq OMX Group for $750 million in cash.

Meanwhile, Molson Coors Brewing Co.'s 2.5% convertibles continued to trade actively in the convertible market, with shares extending gains Monday following a ratings upgrade by Goldman Sachs for the Denver-based beer and beverage maker and distributor to "buy" from "neutral."

In the primary market, Intelsat Global Holdings SA launched an offering of $150 million of three-year mandatory convertible preferred shares, or 3 million shares at $50 par, that will price concurrently with the Luxembourg-based satellite company's initial public offering slated for April 17.

The Intelsat deal caught the attention of market players given that IPOs with convertibles are few and far between. The last IPO and convertible was General Motor Co.'s post-bankruptcy deal in 2010, a New York-based convertibles analyst said.

Liberty Interactive Corp. launched an offering of $550 million of 30-year senior debentures exchangeable into shares of Time Warner Cable Inc. and Time Warner Inc. that was expected to price after the market close Wednesday, according to market sources.

Overall, trading action in the convertible market picked up Tuesday from its holiday lull. Much of the volume was concentrated in investment-grade names.

"Today is much better than last week in terms of volume," an analyst said.

Pricing seemed unchanged on a hedged basis for the most part, a New York-based trader said.

Nuance flat to up on hedge

Nuance's newer, 2.75% convertibles due 2031 were seen at 105.125 versus an underlying share price of $21.40 late in the session Tuesday.

The bonds climbed several points outright but were flat or expanded modestly on a hedged basis. One source said the bonds expanded by about 0.125 point on a hedged basis using a 46% delta.

A second source saw them 0.625 point better dollar neutral, tracking on a 30% delta.

The older, Nuance 2.75% convertibles due 2027 were seen around 125 versus the same share price of $21.40. That was called flat on a dollar-neutral basis.

Nuance shares surged $1.28 or 6.3%, to $21.45.

The bonds' delta moved up a bit on the day with the Carl Icahn news, which drove shares up 6%, a New York-based analyst said.

Icahn has taken a 9.27% passive stake in the company.

"It was enough to move the stock, and delta up slightly," the analyst said.

BGC looks to have come in

BGC Partners' 4.5% convertibles due 2016 traded up to as high as 105 but moved down again later. At 103.25 it was up 4 points. The bonds had been about 99 versus an underlying share price of $3.85 previously.

"On a 25% delta that nukes to 103.75, so flat to up slightly dollar neutral," a Connecticut-based trader said.

At the lower pricing, which was as low as 101.35, according to Trace data, the bonds would have come in some.

BGC shares surged $1.87, or 49%, to $5.72 in heavy volume.

BGC has agreed to sell its electronic Treasury trading to Nasdaq OMX for a total consideration of up to $1.23 billion, including an earn-out of up to $484 million of Nasdaq common stock to be paid over 15 years. The deal is expected to close in mid-2013 and will be accretive to earnings.

Intelsat to price

Intelsat's mandatory preferreds were talked to yield 5.75% to 6.25% with an initial conversion premium of 17.5% to 22.5%, according to a syndicate source.

The junior non-voting mandatory preferreds are coming concurrently with an IPO that was scaled back from an initially talked $1.75 billion in size to about $500 million in size using the midpoint of the expected price per share of between $21 and $25.

"It's pretty straight forward. The only complication is how do you value the stock?" an analyst said of the concurrent convertible and IPO offerings.

There is a greenshoe for an additional 450,000 mandatories and 3,260,869 additional common shares.

The mandatories will be listed on the New York Stock Exchange under the symbol "I PR A," and the common shares will be listed under the symbol "I."

Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and BofA Merrill Lynch are acting as joint bookrunning managers; Barclays, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Nomura Securities International, Inc. and UBS Securities LLC are acting as bookrunners; and Evercore Group LLC, HSBC Securities (USA) Inc., RBC Capital Markets, LLC, LionTree Advisors LLC and Raymond James & Associates, Inc. are acting as the co-managers for the proposed offerings.

Intelsat is a Pembroke, Bermuda-based fixed satellite services provider.

Liberty to price

Liberty Interactive's planned $550 million of 30-year senior debentures exchangeable into shares of Time Warner Cable Inc. and Time Warner Inc. were talked at a 0.75% to 1% coupon and a fixed initial conversion premium of 10%.

Proceeds of the Rule 144A deal will be used to retire a portion of Liberty's outstanding 3.125% exchangeable senior debentures of its wholly owned subsidiary Liberty Interactive LLC due 2023.

Retirement of the old bonds, of which there were about $1.13 billion outstanding as of March 30, may take the form of open market or privately negotiated transactions. Any old bonds remaining outstanding after the closing of the new deal will be called.

Joint bookrunners are BNP Paribas Securities Corp. (billing & delivering and repurchase agent), BofA Merrill Lynch, Credit Suisse Securities, Wells Fargo Securities LLC, Barclays and Morgan Stanley.

The debentures are non-callable until April 5, 2018 and then are provisionally callable until April 5, 2023 at a 120% price trigger.

There is an investor put on March 30, 2023.

There is dividend protection. Sixty-seven percent of the reference shares per debenture will be Time Warner Cable stock and 33% will be Time Warner stock.

Englewood, Colo.-based Liberty Interactive owns interests in electronic retailing, media, communications and entertainment businesses.

Mentioned in this article:

BGC Partners Inc. Nasdaq: BGCP

Liberty Interactive Corp. Nasdaq: LINTA

Nuance Communications Inc. Nasdaq: NUAN

Molson Coors Brewing Co. NYSE: TAP

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