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Morning Commentary: Convertible bond market players eye primary; MagnaChip comes upsized
By Stephanie N. Rotondo
Seattle, Jan. 11 – The convertible bond market was focused on new issues in early Wednesday trading.
MagnaChip Semiconductor SA, a subsidiary of MagnaChip Semiconductor Corp., brought an upsized $75 million of 5% exchangeable senior notes due 2021 with an exchange premium of 30% on Wednesday.
The deal came tight to the yield talk of 5% to 5.25%, with an exchange premium of 30%. The deal was also upsized from $65 million.
A sellside source said he heard the notes were trading up to 105 in early dealings.
“The stock is up 17 cents, so there’s a lot of leverage,” he said.
Barclays and Citigroup Global Markets Inc. ran the Rule 144A deal.
The notes are exchangeable into common stock at a rate of 121.1387 shares, equal to $8.26 per share.
Proceeds will be used for an anticipated cost reduction program to be implemented in the first half of 2017, for capital expenditures and to repurchase stock via a recently approved stock repurchase program and for general corporate purposes.
Meanwhile, Nabors Industries Inc.’s new $500 million of 0.75% exchangeable senior notes due 2024 – a deal priced Tuesday with an exchange premium of 40% – were making up a fair bit of the day’s trading volume.
A trader said at least $20 million of the debt had traded as of mid-morning. He pegged the paper in a 102.625 to 102.75 context.
The stock (NYSE: NBR) was meantime up 9 cents at $17.78.
The deal came at the rich end of talk for a 0.75% to 1% yield and a 40% initial exchange premium.
Citigroup and Goldman Sachs & Co. led the Rule 144A deal.
The exchange rate is 39.7488 shares per each $1,000 of notes, representing $25.16 per share. Exchanges will be settled with cash, common stock, or a combination, at the company’s option.
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