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Morning Commentary: Kinder Morgan launches $1.6 billion; Ctrip jumps outright, on hedge on share swap
By Rebecca Melvin
New York, Oct. 26 – There was little portfolio adjusting going on in U.S. convertibles after Kinder Morgan launched its $1.6 billion mandatory convertible preferred deal with enticing price talk, market sources said.
The mandatories of the Houston-based energy pipeline company were talked at a fixed 9.75% dividend and 17.5% to 22.5% initial conversion premium.
The company pays a high dividend on the common, a New York-based trader said regarding the fat dividend talked on the preferred.
Meanwhile, much of the early focus in convertibles was on Ctrip.com International Ltd. after the China internet travel site announced a share swap partnership with Qunar Cayman Islands Ltd., a company controlled by Baidu Inc.
Ctrip’s newer D convertibles expanded about 2 points on a dollar-neutral, or hedged, basis, a Connecticut-based trader said.
Ctrip shares were last up $16.59, or 22%, at $90.93.
Ctrip’s common shares jumped by nearly 30% after the partnership was announced. Under the deal, Baidu, which controls Qunar, will own 25% of Ctrip, and Ctrip will have a 45% voting interest in Qunar. The exchange ratio represents a 36% premium to Qunar’s closing share price on Friday.
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