American Tower mandatory adds on debut; Prologis expands on hedge; salesforce contracts

By Rebecca Melvin

New York, Feb. 26 – American Tower Corp.’s newly priced 5.5% convertible mandatory preferred shares traded well on their debut in the convertibles secondary market on Thursday after the Boston-based communications tower sites company priced $1.25 billion of the stock through the rich end of dividend talk, market sources said.

The American Tower mandatory was last seen at 101.5 bid, 102 offered versus the underlying stock at about $98.00. That was better on a dollar-neutral, or hedged, basis by 0.75 point, a New York-based trader said.

Also in the primary arena, Rovi Corp. was expected to price $300 million of convertible notes after the market close. Shares of the Santa Clara, Calif.-based software and internet media company were down 5% on the back of the convertibles launch.

Back in established issues, the Prologis convertibles were slightly lower on an outright basis but improved on a dollar-neutral basis in heavy trading action after news that the Denver-based real estate investment trust was going to pay out its dividend after the March 15 maturity of the convertibles.

Meanwhile, salesforce.com Inc.’s 0.25% convertibles due 2018 jumped about 6.5 points on an outright basis but contracted on a hedged basis by about a point as outright sellers stepped in to take profits, a New York-based trader said.

Also in trade was Emulex Corp. after news that Avago Technologies Ltd. of Singapore has agreed to purchase the Costa Mesa, Calif.-based networking software and hardware company for $606 million.

The Emulex 1.75% convertibles due 2018 jumped to 101 from about 94.75, according to a market source.

Amid new economic data, equities were mixed, while oil and U.S. Treasury prices were lower.

The S&P 500 stock index slipped 3.12 points, or 0.2%, to 2,110.74; the Dow Jones industrial average lost 10.15 points, or 0.06%, to 18,214.42; and the Nasdaq stock index gained 20.75 points, or 0.4%, to 4,987.89.

The price for Brent North Sea crude for April delivery sank $1.58 to $60.05 a barrel in London, while in New York, West Texas Intermediate for April fell $2.82 to close at $48.17 a barrel.

In economic data, durable goods orders rose 2.8% in January, the biggest increase since July, the Commerce Department reported. But the consumer price index for January fell 0.7% from December, while core CPI rose just 0.2%, the Labor Department reported. Over the past year, core prices have risen just 1.6%, which is below the 2% increase that the Federal Reserve targets as optimal for economic growth.

American Tower adds

American Tower’s newly priced 5.5% convertible mandatory preferreds traded last at about 101.5 bid, 102 offered with shares at about $98.00.

There was a hedged gain of about 0.75 point, a trader said.

The new issue was very active in the early going, and “it died out real quick. But they are going to end up,” the trader said.

American Tower shares closed up $1.03, or 1%, $98.88.

“People made money; it was a good deal,” a New York-based trader said.

On an outright basis, they were definitely up, and they were up for a while,” the trader said.

American Tower priced $1.25 billion of the mandatories beyond the rich end of coupon talk and at the midpoint of premium talk.

The deal came fast on the heels of Actavis plc’s $4.6 billion of 5.5% mandatory convertible preferred stock, which came at the rich end of terms that were tightened during marketing, and they also traded well in the aftermarket.

American Tower plans to use proceeds to help fund the company’s transaction with Verizon Communications Inc., under which American Tower will lease, acquire or operate and manage up to 11,489 Verizon wireless communications sites. American Tower also priced $2.28 billion shares of common stock concurrently with the mandatories.

Joint bookrunning managers were Goldman Sachs & Co. (lead), RBC Capital Markets LLC, Morgan Stanley & Co. LLC, RBS Securities Inc. and TD Securities (USA) LLC.

Prologis expands on hedge

Prologis’ 3.25% convertibles due March 15, 2015 traded around 109.5 during the session, down 0.4 point on the day on an outright basis but better by about 0.5 point on a dollar-neutral basis, a New York-based trader said.

Sharse of Prologis slipped 47 cents, or 1%, to $42.43.

The company moved the ex-date of the common dividend to after the maturity of the convertible, the trader said. “That makes the convertible more attractive.”

Prologis announced that it plans to raise the company’s annualized dividend by 9% to $1.44 per share and pay it for the quarter ending March 31.

The post maturity date for the dividend means that hedged players, who are short the stock, are not liable for the dividend payout.

“It’s today’s interesting name and the No. 1 Tracer,” the trader said.

There had been speculation that the ex-date was going to be 10 days earlier, the trader noted.

salesforce.com contracts

salesforce.com’s 0.25% convertibles due 2018 traded up to about 6.5 points on an outright basis to 122 as shares surged 12% on positive earnings. But on a hedged basis, the salesforce.com bonds contracted about a point, a New York-based trader said.

There were outright players who sold the bonds to pocket profits, the trader said.

San Francisco-based salesforce.com reported a narrowed loss of $65.8 million, or 10 cents a share, for its fourth quarter ended Jan. 31, compared to a loss of $116.6 million, or 19 cents, in the year-earlier period.

Excluding items, the company earned 14 cents per share, which was in line with estimates.

The company also reported $1.44 billion of revenue for the quarter, which was up 5% from the year-earlier period and also in line with estimates.

Looking ahead, the company said it expects to earn 13 cents to 14 cents per share and revenue of $1.485 billion to $1.505 billion for the current quarter, which was a little below expectations for 15 cents per share of profit and $1.5 billion of revenue.

For the full year, the company expects to earn 67 cents to 69 cents per share on revenue of $6.475 billion to $6.520 billion. That is an increase of about 20% and includes a foreign exchange headwind of about $175 million to $200 million.

The salesforce.com earnings report was followed by several analysts’ price target upgrades for the enterprise cloud computing company.

Deutsche Bank raised its price target to $80.00 per share from $70.00.

salesforce.com shares gained $7.37, or 11.7%, to $70.24 on Thursday.

Mentioned in this article:

Actavis plc NYSE: ACT

American Tower Corp. NYSE: AMT

Emulex Inc. NYSE: ELX

Prologis NYSE: PLD

Rovi Corp. Nasdaq: ROVI

Salesforce.com Inc. NYSE: CRM

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