New T-Mobile trades in line with shares; new Envestnet adds; energy space slides again

By Rebecca Melvin

New York, Dec. 10 – T-Mobile US Inc.’s newly priced 5.5% mandatory convertibles traded actively Wednesday in line with the underlying shares and ended the session below par, with the stock down almost 2%, market sources said.

The new T-Mobile convertibles started out the session above par at 50.5 and were quoted at 49.875 with the underlying shares down 0.5%. But shares sold off into the close, and the mandatories followed lower.

Envestnet Inc.’s new 1.75% convertibles also traded actively and jumped to 102.5 out of the chute. They were last heard at 100.75 to 101.75 with the underlying shares up fractionally. But shares of the Chicago-based financial software and services company also traded down into the close.

The Envestnet convertibles were said to have expanded about 1.5 points on swap.

The two new deals accounted for much of the day’s trading action. But energy convertibles were also trading, and significantly lower, as crude oil sold off along with equities after the Organization of Petroleum Exporting Countries reduced its projections for 2015 global oil demand.

One market source reported active trades in BPZ Resources Inc. at 32. The Houston-based oil and gas exploration and development company priced $125 million of 8.5% convertibles at a 10% discount to par in September. The company also has a 6.5% convertible.

BPZ shares ended down 11% at $0.17.

A second market source said that Cobalt International Energy Inc., another oil and gas E&P company, was also a focus of trade. The Cobalt 2.625% convertibles were seen last at 61, according to a trader, with shares down about 6%.

Energy XXI Ltd. was quoted lower but not heard to have traded with those shares down 10% at $2.88.

“EXXI was offered at 40.50 with no trades,” a Connecticut-based trader said.

Energy XXI’s 3% convertibles due 2018 had traded down to 42 from 49 this week.

Goodrich Petroleum Corp. traded at 54.5, which was relatively resilient against shares that slid another 8.8%. The bonds had dropped hard Monday and recouped on Tuesday.

West Texas Intermediate crude for January delivery fell $2.60, or 4%, to $61.22 a barrel.

Meanwhile the equity markets were in meltdown mode, according to a New York-based trader. The Nasdaq stock market fell 82.44 points, or 1.7%, to 4,684.03; the S&P 500 stock index fell 33.68 points, or 1.6%, to 2,026.14 and the Dow Jones industrial average lost 268.05 points, or 1.5%, to 17.533.15.

In the primary market, Fiat Chrysler Automobiles NV’s planned $2.5 billion of two-year mandatory convertibles, which were seen pricing after the market close, were not heard in the gray market.

Also pricing after the market close was IGI Laboratories Inc.’s $125 million of five-year convertible senior notes. The New Jersey-based pharmaceutical company, which is planning on bringing notes to yield 3.25% to 3.75% and with an initial conversion premium of 25% to 30%, was unknown to one convertibles trader, who is focused on health care names.

“I don’t know this company well enough yet. I never heard of it until now,” the trader said.

T-Mobile drops below par

T-Mobile’s 5.5% mandatory convertible preferred shares were last heard at 49.25 bid, 49.75 offered, with the underlying shares down more than 1%.

Shares of the Bellevue, Wash.-based wireless company closed down by about 2%.

“T-Mobile was the only thing that dominated trading,” a market source said.

T-Mobile sold $870 million of the three-year preferred shares at the cheap end of talked terms.

The shares have a $50 liquidation price. They came with a 20% initial conversion premium.

Joint bookrunning managers were Goldman Sachs & Co., Morgan Stanley & Co. LLC and Citigroup Global Markets Inc. Co-managers were Barclays, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC.

There is a $130 million greenshoe.

Proceeds will be used for general corporate purposes, including capital investment and acquisition of additional spectrum unrelated to the spectrum that may be obtained in the Federal Communication Commission’s pending AQS-3 spectrum auction.

Envestnet adds on debut

Envestnet’s 1.75% convertibles were seen at 100.75 to 101.75 close to the market close with shares about even on the day. The New Jersey-based pharmaceutical company priced an upsized $150 million of five-year convertible senior notes at the midpoint of terms.

The securities added about 1.5 points on swap, and they traded actively, a syndicate source said.

The company originally planned $125 million of the convertibles. It was sold via joint bookrunners Stifel, Nicolaus & Co. Inc., Credit Suisse Securities (USA) LLC and BMO Capital Markets Corp. Co-managers are Sandler O’Neill + Partners, LP, Sterne Agee & Leach Inc. and William Blair & Co. LLC.

The notes will be non-callable.

Proceeds are for general corporate purposes, including for selective strategic investments through acquisitions, alliances or other transactions.

Chicago-based Envestnet is a provider of wealth management software and services to independent financial advisers.

Energy plunges again

“The market is melting down,” a market source said regarding equity indices, which were seeing broad-based losses against sharp losses in oil.

OPEC reduced its estimate for 2015 demand. The 28.9 million barrels per day demand forecast is the least amount needed since 2003.

Brent crude fell 3.9% to $64.24 per barrel on the London-based ICE Futures Europe Exchange. That was the lowest price since July 2009.

Brent crude fell into correction territory earlier this year amid speculation that Saudi Arabia and other OPEC nations wouldn’t cut output in response to a surplus.

In reaction to the renewed slump, “most people were trading around their hedges,” a trader said Wednesday.

“The event-driven guys have gotten smoked for December,” he said.

As for the level of market activity, he said, “I don’t see a ton of action going into the end of the year; people are hoping for a rebound.”

Mentioned in this article:

BPZ Resources Inc. NYSE: BPZ

Cobalt International Energy Inc. NYSE: CIE

Energy XXI Ltd. Nasdaq: EXXI

Envestnet Inc. NYSE: ENV

Fiat Chrysler Automobiles NV Nasdaq: FCAU

IGI Laboratories Inc. NYSE: IG

Goodrich Petroleum Corp. NYSE: GDP

T-Mobile US Inc. Nasdaq: TMUS

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