By Rebecca Melvin
New York, March 26 - HomeAway Inc.'s newly priced 0.125% convertibles traded well on their debut in the secondary market on Wednesday after the Austin, Texas-based vacation rental site priced $350 million of five-year notes at the tight end to beyond the tight end of talked terms.
The new HomeAway bond traded last around 102.5 bid, 103.125 offered with the underlying shares at $38.86, which was up 0.6%, a Connecticut-based trader said.
Earlier, the HomeAway bonds had traded at 104.25 with the underlying shares up more than 3% at about $39.90. That level was better on a swap by about 2.5 points, a syndicate source said. But HomeAway shares faded as the session went on.
Also in the primary market, Solazyme Inc.'s planned $100 million of five-year convertible senior subordinated notes were expected to price with a 5% to 5.5% coupon and a 20% initial conversion premium.
The bonds were being allocated to investors quickly, a syndicate source said. But with poor stock borrow, hedged participation was expected to be limited, a Connecticut-based trader said.
The registered Solazyme offering was coming concurrently with an offering of 5 million shares of common stock.
Solazyme shares slid $1.55, or 11.8%, to $11.55. Solazyme's existing 6% convertibles, which priced in January 2013, were seen in early action Wednesday at 157.5 bid, 158.5 offered versus an underlying share price of $12.00.
Back in established issues, Exelixis Inc.'s convertibles plunged on an outright basis but expanded about 3.5 points on a dollar-neutral, or hedged, basis, assuming an 80% delta, as shares dropped 39%. The collapse was precipitated by news that the company's phase 3 trial of cabozantinib for the treatment of prostate cancer would "proceed to its final analysis," a development that disappointed investors who hoped the trial would end early as has been the case in other prostate drug trials.
Exelixis' cabozantinib drug was proved for use as a treatment for thyroid cancer at the end of 2012.
Elsewhere, CommonWealth REIT's convertible preferred shares were active again and tacked on another 14 cents, or 0.6%, to $25.08, extending a gain Tuesday on news that the Newton, Mass.-based office and industrial real estate investment trust voted to oust its entire board of directors.
Shenzhen, China-based online sports lottery service provider 500.com Ltd. plans to offer up to $120 million of convertible senior notes via underwriter Deutsche Bank Securities Inc., according to a regulatory filing.
500.com also plans to offer American Depositary Shares under a separate registration statement and a share lending agreement with Deutsche Bank AG, London Branch, an affiliate of Deutsche Bank Securities.
The notes have takeover protection and will not be listed on any exchange.
Proceeds will be used for research and development and business expansion through either investment in its technology platform or strategic acquisition of complementary businesses. Remaining proceeds will be for general corporate purposes.
Equities ended sharply lower, reversing early gains. The Nasdaq stock market put in the worst showing, down 60.69 points, or 1.4%, at 4,173.58; the S&P 500 stock index shed 13.06 points, or 0.7%, to 1,852.56, and the Dow Jones industrial average lost 98.89 points, or 0.6%, essentially erasing Tuesday's 91-point gain and ending at 16,268.99.
New HomeAway trades up
HomeAway's new 0.125% convertibles due 2019 traded last around 102.5 bid, 103.125 offered with the underlying shares at $38.86, which was up 0.6%.
Earlier, the HomeAway bonds traded at 104.25 with the underlying shares at $39.90, which was up more than 3%.
Out of the gate, the bonds were about 103. "They are trading well," the syndicate source said. At late morning, the bonds had been better on a swap by about 2.5 points, the syndicate source said.
In the gray market on Tuesday ahead of final terms being fixed, the HomeAway deal traded at 101.375 bid, 102 offered at the close, with the underlying shares down 2.25%.
"I thought the deal was kind of fairish value going in, and they did great," a Connecticut-based trader said.
He added that "everything is rich and getting richer and there is not enough paper that looks OK."
Shares of HomeAway added 22 cents, or 0.6%, to $38.86 on the day.
HomeAway priced $350 million of five-year convertible senior notes at par to yield 0.125% with an initial conversion premium of 35%, according to a news release.
Pricing of the Rule 144A deal came toward the rich end of 0% to 0.5% coupon talk and beyond the rich end of 27.5% to 32.5%premium talk.
J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. were the joint bookrunners of the offering, for which there is a $52.5 million over-allotment option.
The notes are non-callable for life. They will be settled in cash, shares or a combination of cash and stock.
The deal came with a call spread, or convertible note hedge and warrant transactions. The $81.14 strike on the warrant transactions boosts the conversion premium from the issuer's perspective to 110%.
About $41.4 million of proceeds will be used to pay the cost of the call spread, with remaining proceeds earmarked for general corporate purposes, which may include working capital expenditures, possible stock buybacks and potential acquisitions and strategic transactions.
Austin, Texas-based HomeAway is a vacation rental site.
Solazyme to price
San Francisco-based Solazyme planned to price $100 million of five-year convertible senior subordinated notes in a registered offering being sold via bookrunner Goldman Sachs & Co.
"There is no borrow and it looks like it will be an outright trade. It will do fine; people like the story," a Connecticut-based trader said.
The company, which uses plant-based sugars to produce oils for the chemicals and fuels industries, as well as for the nutrition, skin and personal care markets, is also selling 5 million shares of common stock.
The coupon was talked at 5% to 5.5% with an initial conversion premium of about 20%, according to a syndicate source.
The convertibles are non-callable with no investor puts. There is full dividend and takeover protection.
Proceeds will be used to fund capital expenditures, working capital and general corporate purposes.
Exelixis expands on hedge
Exelixis' 4.25% convertibles due 2019 plunged nearly 40 points to 94.25 bid, 95 offered by the market close, versus an underlying share price of $3.91. Shares fell 39%.
That represents an expansion of about 3.5 points on a hedged basis, assuming that the bonds were held on a delta of about 80% going into the day, a trader said.
An earlier quote on the very actively traded issue was 97 bid, 98 offered versus an underlying share price of $4.10.
Exelixis announced that the Independent Data Monitoring Committee notified the company that a planned interim analysis of a phase 3 pivotal trial has been completed and that the IDMC recommends the trial proceed to its final analysis.
Mentioned in this article:
CommonWealth REIT NYSE: CWH
| CommonWealth REIT convertibles: | NYSE: CWHPE
|
| Exelixis Inc. | Nasdaq: EXEL
|
| 500.com Ltd. | Nasdaq: ADS: WBAI
|
| HomeAway Inc. | Nasdaq: AWAY
|
| Solazyme Inc. | Nasdaq: SZYM
|
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