Macquarie extends gains; Citrix, MGIC, Radian up on swap; Energy & Exploration improves

By Rebecca Melvin

New York, July 11 – Macquarie Infrastructure Co. LLC’s new 2.875% convertibles extended gains on Friday after putting in a strong debut on Thursday as convertibles players continued to chase investment-grade paper, market players said.

In addition, several U.S. convertibles in focus on Friday were lower on an outright basis but better on a dollar-neutral, or hedged, basis. Among those names, Citrix Systems Inc. edged up 0.125 point on swap, and mortgage insurers MGIC Investment Corp. and Radian Group Inc. were 0.25 point better on swap as shares slumped over proposed liquidity rules for mortgage insurers.

Tesla Motors Inc.’s convertibles traded actively with mixed pricing. There were sellers in the Tesla A convertibles, which contracted by about 0.125 point on swap, and buyers in the Tesla B convertibles, which gained between 0.125 point and 0.25 point, a New York-based trader said. Tesla shares were down about 5% on the week.

In the primary market, Energy & Exploration Partners Inc.’s pre-IPO convertibles priced with an 8% coupon, and those notes were seen in trade at 100.25 bid, 101 offered after the company priced $375 million of the five-year convertible subordinated notes under Rule 144A.

“Other than that, there was not a ton,” one New York-based trader said. And quiet trading was the trend on other convertibles desks as well as stocks meandered for much of the session before closing higher and as credit was flat.

Macquarie adds 0.5 point

Macquarie’s new convertibles traded on Friday at 106 bid, 106.75 offered with the underlying shares at $68.70.

That was up 1.5 points on an outright basis and up another 0.5 point on a dollar-neutral basis, compared to 105 with shares at $66.73 at the close on Thursday.

The deal was seen adding 5 points on a dollar-neutral basis on Thursday.

Macquarie shares were up $2.19, or 3.3%, to $68.92 on Friday.

“Macquarie shares were trading quite a bit higher, and the bonds did so well amid the demand for investment-grade paper,” a New York-based trader said.

The registered, off-the-shelf deal was upsized to $305 million, up from $250 million initially talked.

Pricing came at the fixed 2.875% coupon, which was revised during two-day marketing from 2.875% to 3.375% and at the tight end of revised talk for the premium. Premium talk was revised to 22.5% to 27.5% from 17.5% to 22.5%.

There is a $45 million greenshoe, which was upsized from $37.5 million.

Macquarie also priced 10 million shares at a price of $66.50 per share, which raised $665 million. There is a greenshoe for an additional 1.5 million shares.

The convertibles are non-callable for life and have standard dividend and takeover protection.

Joint bookrunning managers of the deal are Barclays, J.P. Morgan Securities LLC, RBC Capital Markets LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC.

Co-managers are BofA Merrill Lynch and Oppenheimer & Co. The notes will not be listed on any securities exchange.

New York-based Macquarie owns, operates and invests in a diversified group of infrastructure businesses that provide basic services.

Citrix trades actively

Citrix’s 0.5% convertibles due 2019 traded actively and were quoted at 106.125 bid, 106.5 offered versus an underlying share price of $62.94.

That was better on swap by about 0.125 point, assuming a delta of about 46% to 50%, even though the underlying shares were little changed, a New York-based trader said.

“These trade actively every single day, and they were definitely better for sale [on Friday],” a trader said, “But on a 45% delta, the bonds were slightly better on swap.”

Shares of the Fort Lauderdale, Fla.-based cloud computing company ended up 8 cents, or 0.1%, at $62.83 on Friday.

MGIC, Radian in focus

The convertibles of both MGIC and Radian were in focus Friday although not much was trading early on as shares of the mortgage insurers slumped.

But the convertible bonds were a little better on swap, a Connecticut-based trader said.

The companies’ shares were under pressure following news that the Federal Housing Finance Agency’s proposed standards for the industry would mean their available assets would be materially less than the minimum requirements.

The development is “not a credit event, but more of an equity problem; and vol. is higher because of this,” the convertibles trader said.

MGIC said the proposal, which would require insurers backing mortgages owned or guaranteed by Fannie Mae and Freddie Mac to hold liquid assets of at least 5.6% of their risk exposure, is far in excess of what’s needed to reduce industry risk.

The Milwaukee-based company said it could face a shortfall of about $600 million at the end of this year due to the rules.

Radian said that the requirements are more onerous than its experience with defaults would suggest.

MGIC’s 2% convertibles due 2020 traded at 133.5 in the early going Friday, according to Trace data. Shares were down more than 10% in the early going and closed down 88 cents, or 9.5%, at $8.36.

Radian's 2.25% convertibles due 2019 were seen trading at 142.25 versus an underlying share price of $13.60, compared to trade in the 140 to 141 context on Thursday and 144.5 to 144.75 previously.

Radian’s 3% convertibles due 2017 were seen trading at 137.5 bid, 138 offered versus an underlying share price of $13.80. That was down from 140 to 141 previously.

Shares of the Philadelphia-based mortgage insurer were down78 cents, or 5.4%, at $13.77 Friday.

Energy & Exploration up

Energy & Exploration’s 8% convertibles due 2019 traded at 100.25 bid, 101 offered on Friday after the Fort Worth, Texas-based developer of onshore oil and gas assets priced $375 million of subordinated notes under Rule 144A at par.

Holders of the notes will have the option to convert their notes into shares of Energy & Exploration upon the closing of the first qualified, registered public offering of the company’s common stock. No timing of the IPO was yet available.

Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Global Hunter Securities LLC were joint bookrunners of the offering.

Proceeds of the deal will be used together with borrowing under a senior secured term loan to pay the purchase price for its recently announced acquisition of oil and gas assets from TreadStone Energy Partners LLC, to refinance and replace its outstanding senior unsecured notes and to fund a portion of its 2014 and 2015 capital expenditure budget.

Mentioned in this article:

Citrix Systems Inc. Nasdaq: CTXS

Macquarie Infrastructure Co. LLC NYSE: MIC

MGIC Investment Corp. NYSE: MTG

Radian Group Inc. NYSE: RDN

Tesla Motors Inc. Nasdaq: TSLA

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.