Convertibles quiet; Intel, Tesla in line; Acorda, Restoration Hardware, EZCorp to price

By Rebecca Melvin

New York, June 16 – U.S. convertibles were mostly quiet on Monday, with market players unmoved by merger news affecting a couple of convertibles issuers and as stocks wavered between narrow gains and losses.

“The session was so uneventful; it was like watching paint dry,” a New York-based trader said.

But after the market close, three new convertibles deals were launched in the primary market.

During the session, Intel Corp.’s 2.95% convertibles were active, and that bond was moving in line with the underlying shares on a dollar-neutral basis from Friday, a second New York-based trader said.

He quoted the Intel 2.95% convertibles at 122.125 bid, 122.625 offered versus an underlying share price of $29.96. Shares of the Santa Clara, Calif.-based chip giant were up fractionally.

Tesla Motors Inc.’s 1.25% convertibles due 2021 were also up in line with the underlying shares at around 92 in the early going as shares of the electric car maker were up $5.90, or 2.8%, to $212.40. Tesla shares ended much higher, though, spurting up $18.19, or 8.8%, to $224.61.

SanDisk Corp.’s convertibles were unaffected by news that the Milpitas, Calif.-based data storage company is planning to acquire Fusion IO for about $1.1 billion.

SanDisk’s 1.5% convertibles traded in line at 200.5 bid, 200.875 offered versus an underlying share price of $101.93, a trader said.

Nuance Communications Inc.’s 2.75% convertibles due 2027 traded at 103.5, according to Trace data, with shares higher on word that the Burlington, Mass.-based voice recognition software company is considering selling itself and has talked with potential buyers.

Equities ended in the black, after alternating between gains and losses. The Dow Jones industrial average ending up 5.27 points, or 0.03%, to 16,781.01, the S&P 500 stock index lifted 1.62 points, or 0.08%, to 1,937.78 and the Nasdaq stock market added 10.45 points, or 0.24%, to 4,321.11.

One New York-based trader said, “The market still feels heavy.”

After the market close, Acorda Therapeutics Inc. and Restoration Hardware Holdings Inc. launched convertibles offerings for $300 million each. The Acorda deal is for seven-year senior notes, non-callable for three years, that were seen pricing after the market close on Tuesday. Restoration Hardware is pricing five year non-callable notes after the market close on Wednesday.

In addition, EZCorp Inc. launched an offering of $175 million of five-year convertible notes that will be priced under Rule 144A, according to a news release.

Restoration to price

Corte Madera, Calif.-based specialty retailer Restoration Hardware expects to price $300 million of five-year convertible senior notes after the market close Wednesday at a 0% to 0.5% coupon and with an initial conversion premium of 30% to 35%, according to a market source.

“Restoration Hardware is good because it’s in the retail space, and that’s a sector that is underrepresented in the convert space, so it represents good diversification for market players,” a New York-based trader said.

The Rule 144A Restoration deal has a $50 million greenshoe and was being sold via BofA Merrill Lynch and Goldman Sachs & Co. as joint bookrunners.

The notes are non-callable and have net share settlement.

In connection with the notes, Restoration Hardware expects to enter into convertible note hedge and warrant transactions, or a call spread.

Proceeds will be used to pay the net cost of the call spread and for general corporate purposes, including repayment of all of the outstanding debt under its credit facility.

Acorda to price $300 million

Acorda, a biopharmaceutical company based in Ardsley, N.Y., plans to price $300 million of seven-year convertible senior notes after the market close Tuesday that were talked to yield 1.75% to 2.25% with an initial conversion premium of 27.5% to 32.5%, according to a market source.

The registered offering has a $45 million greenshoe and was being sold via J.P. Morgan Securities LLC acting as the bookrunning manager.

The notes are non-callable for three years and then provisionally callable if shares exceed 130% of the conversion price. There are no puts.

Proceeds are expected to be used for general corporate purposes, including to fund possible acquisitions of, or investments in, complementary businesses, products and technologies. Acorda has not entered into any agreements or commitments regarding any acquisitions or investments at this time.

EZCorp plans $175 million

EZCorp, an Austin, Texas-based operator of pawn stores and short-term consumer loan stores, launched an offering of $175 million of five-year convertible notes that will be priced under Rule 144A, according to a news release.

The deal includes a $25 million greenshoe.

In connection with the offering, EZCorp plans to enter into convertible note hedge and warrant transactions.

Proceeds will be used to pay for the call spread and to repurchase up to 1 million shares of common stock in privately negotiated transactions and to repay outstanding borrowings under the company’s revolving credit facility.

Mentioned in this article:

Acorda Therapeutics Inc. Nasdaq: ACOR

EZCorp Inc. Nasdaq: EZPW

Intel Corp. Nasdaq: INTC

Nuance Communications Inc. Nasdaq: NUAN

Restoration Hardware Holdings Inc. NYSE: RH

SanDisk Corp. Nasdaq: SNDK

Tesla Motors Inc. Nasdaq: TSLA

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