Amkor, Manor Care gain on debuts; JDS Uniphase pulled down by stock; Global Crossing plans deal

By Kenneth Lim

Boston, May 12 - Convertible bond investors had mixed reactions to the impact of a poor equity session on Friday, with some grumbling about the stock sell-down while others found cheer in the increased volatility.

The new convertibles by Amkor Technology Inc. and JDS Uniphase Corp. could have done better but for declines in their stock, traders said. Meanwhile, the new issue by Manor Care Inc. saw only a modest gain in line with a slight improvement in the stock.

The spate of new issuance continued on Friday with Global Crossing Ltd. announcing a planned $125 million offering of five-year convertible senior notes that were talked at an initial conversion premium of 20% to 25%. The deal is expected to price the week of May 22, and the coupon will be announced during the marketing period, market sources said.

Also, Medtronic Inc.'s newest 1.625% convertible due 2013 was flat on Friday, trading at about 97.125 against a stock of $48.60. Medtronic stock (NYSE: MDT) ended at $48.72, down by 0.06% or 3 cents.

"There was nothing new there," a buy-side convertible bond trader said. "There was a big seller...but other than that there was nothing in particular."

Medtronic is a Minneapolis-based maker of medical devices.

American Express Co.'s 1.85% convertible due 2033 was slightly better on an outright basis in line with gains in the stock. The convertible was marked at around 102.25 against a stock price of $53 during the day. American Express stock (NYSE: AXP) gained 0.34% or 18 cents to end at $52.89.

Friday's convertible bond market in general was described as a mixed session as the equity markets fell, with narrow interest focused on a few names and new issues, market sources said.

The Dow Jones Industrial Average fell 1.04% or 119.74 points on Friday to close at 11,380.99, while the Nasdaq Composite Index dropped 1.27% or 28.92 points to finish at 2,243.78.

A sell-side trader who traded in some distressed names felt that the convertible bond market was "definitely more active" on the stock sell-off.

"Things got better today, the converts seemed to get better," the trader said. "The stock market was down, but that's good for converts because you see trading and you see volatility. You're seeing volatility again in the stock market, and that's good for the convert market."

But the buysider said that any gains to be made from the equity slide were likely confined to "some of the more vega-sensitive names."

For the buysider, Friday's convertible bond market was "sloppy" and he "didn't see too much trading."

"The new deals didn't hold up that well, their stocks were sold off," the buysider noted.

Amkor's new deal up despite lower stock

Amkor Technology's new 2.5% convertible due 2011 had the best showing among the three new deals that came to market on Friday, with bids coming in about ¾ point above par despite a slide in the stock.

The convertible opened around 100.75 bid, 101.25 offered, a convertible trader said. Another trader said the convertible was 100.25 bid, 100.75 offered at the closing stock price of $10.82. Amkor stock (Nasdaq: AMKR) closed 3.57% or 40 cents lower on Friday.

"Those were really active today [Friday]," the second trader said.

Amkor upsized the offering to $190 million late Thursday and priced it within talk, at an initial conversion premium of 30%. Price talk was for a coupon of 2.375% to 2.875% and an initial conversion premium of 27.5% to 32.5%.

The size of the deal was originally set at $150 million without a greenshoe. There is now an over-allotment option for a further $28.5 million.

Citigroup Global Markets was the bookrunner for the off-the-shelf deal. Citigroup also ran the books for a concurrent $400 million offering of 9.25% senior notes due 2010 by Amkor.

Amkor, a Chandler, Ariz.-based semiconductor test and assembly service provider, will use the proceeds from the convertible offering to redeem, repurchase or retire part of its outstanding 10.5% senior subordinated notes due 2009.

JDS Uniphase in line with stock slide

JDS Uniphase's fresh 1% convertible senior unsecured note due 2026 was dragged down on an outright basis by the stock but stayed in line on a dollar-neutral basis on Friday.

The $375 million offering was priced late Thursday within talk with an initial conversion premium of 25%. Price talk guided for a coupon of 0.5% to 1% and an initial conversion premium of 20% to 25%.

There is an over-allotment option of $50 million.

JP Morgan and Merrill Lynch ran the books for the Rule 144A offering.

The new convertible opened flat early Friday, then slid on an outright basis and was seen at 97.875 bid, 98.375 offered against a $2.88 stock price in the afternoon. On a dollar-neutral, however, the convertible stayed in line with the stock. The convertibles were offered at par, and the initial conversion price was set at $3.79 per share.

JDS Uniphase stock (Nasdaq: JDSU) ended at $2.92, down by 3.63% or 11 cents.

"The new converts were hit by the stock, and the coupon may have been too low," a sell-side convertible bond trader said.

JDS Uniphase is a San Jose, Calif.-based optical networking equipment supplier. It has earmarked the proceeds of the offering for general corporate purposes, which may include repaying existing debt.

Manor Care up with stock on debut

Manor Care's new 2% convertible due 2036 traded slightly higher in line with a gain in the stock on Friday, as observers described the newly priced convertible as fair and a bet on future stock volatility.

Manor Care (NYSE: HCR) priced its $250 million offering late Thursday with an initial conversion premium of 10%, within price talk that guided for a coupon of 2% to 2.5% and an initial conversion premium between 10% and 15%.

There was no over-allotment option.

JP Morgan was the bookrunner of the Rule 144A deal.

The convertible traded in line with the stock at 0.125 point above par against a stock that rose 0.69% or 31 cents to close at $45.54, a sell-side trader said. The convertibles were offered at par.

A convertible bond analyst said the deal was priced weak and "didn't look like too much traded in the after-market.

"It looks about fair value, not particularly attractive," the analyst said.

The analyst said most investors who bought the convertibles were taking a view on the volatility of the stock and betting that the volatility will pick up.

"The vol is a little low at this point, but in the past it has been higher, and comparable companies have a little bit higher vol," the analyst said.

Manor Care is a Toledo, Ohio-based provider of short-term post-acute and long-term health care. The company will use the proceeds from the offering to buy back $244 million of its common stock, including about $125 million expected to be sold by purchasers of the convertible notes.

Global Crossing plans $125 million deal

Global Crossing on Friday said it plans to sell $125 million of five-year convertible senior notes, with talk guiding for an initial conversion premium of 20% to 25%.

The deal is expected to price the week of May 22, and the coupon will be announced during the marketing period, market sources said.

There is a greenshoe option for a further $18.75 million.

The convertible bonds will be sold concurrently with an offer of 6.75 million shares of its common stock.

Goldman Sachs is the bookrunner of the registered off-the-shelf deal.

Global Crossing is a Bermuda-headquartered provider of internet-based telecommunications solutions. It will use the proceeds from the convertible and stock offerings to fund general corporate purposes, which may include buying assets and businesses. Part of the proceeds will also be used to buy the portfolio of U.S. Treasury securities to pay for the first three years' interest payments for the convertibles.

Global Crossing stock (Nasdaq: GLBC) closed at $22.25 on Friday after the deal was announced, lower by 12.4% or $3.15.

© 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.