Planned Gogo convertible looks cheap but lacks stock borrow; Goodrich remains strong

By Rebecca Melvin

New York, March 3 – Convertibles players eyed a new deal from Gogo Inc. on Tuesday that was seen pricing after the market close and considered cheap from an investor’s perspective. The deal, however, wasn’t generating widespread interest due to limited stock borrow, market sources said.

Gogo’s $300 million deal of five-year convertible senior notes was pricing together with a stock borrow facility that would be used primarily by the deal’s underwriters and affiliates.

Itasca, Ill.-based Gogo is an in-flight internet and entertainment provider.

Back in established issues, trading remained rather anemic, sources said, as a lowered level of new issuance – other than mandatories – and a good number of maturing issues have kept sellers out of the market, a New York-based trader said.

“At some point, they’ll have enough paper and sell some; but right now they have plenty of space,” the trader said of convertible portfolios.

A second New York-based trader said that the recent new mandatory convertibles, namely Actavis plc’s and American Tower Corp.’s mandatories, which both have a 5.5% dividend, remained in demand and pricing was firm. “They were “mostly better to buy,” he said.

Meanwhile, Goodrich Petroleum Corp.’s 5% convertibles have jumped to 59 bid, 60 offered from about 43 in the last three sessions. Shares of the Houston-based oil and gas exploration and production company remained weak for a second straight day, but the bonds remained stronger.

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