Qihoo trades mostly in line; Allegheny adds; American Realty slips; Green Plains to price

By Rebecca Melvin

New York, Sept. 16 - Convertibles had an upward bias on an outright basis on Monday as both the stock and bond markets pulled higher initially on word that Lawrence Summers withdrew his name from consideration to be the next chairman of the Federal Reserve.

On a hedged basis, convertibles looked to be in line with the movement in underlying shares, market players said.

"They felt like they were better at first, but they were in line," a New York-based trader said.

Qihoo 360 Technology Co.'s convertibles, which priced last month, expanded in early trading with the underlying shares of the China web search engine dropping on news that Tencent Holdings Ltd. is buying a stake in Qihoo's competitor, Sohu.com Inc. Later, the Qihoo 2.5% convertibles were in line, a New York-based trader said.

Allegheny Technologies Inc.'s 4.25% convertibles due 2014 were active in trade and a little stronger outright as well as on a hedged basis even with a jump in the underlying shares of the Pittsburgh-based specialty metals company on news it is selling its tungsten materials division to Kennametal for $605 million.

MetLife Inc.'s mandatory convertibles were also a little better in trade and quoted at 29.75 bid, 29.875 offered at the market close, which was 0.15 to 0.2 point better on a hedged basis, a New York-based trader said.

But American Realty Capital Properties Inc.'s 3% convertibles due 2018 traded down nearly a point to 94.749 with the underlying shares of the New York-based real estate investment company down 4%.

In the primary market, Green Plains Renewable Energy Inc. launched a $75 million overnight deal of five-year convertibles talked to yield 3% to 3.5% with an initial conversion premium of 20% to 25%.

The broader markets were initially relieved Monday that Summers was no longer in the running to be the next Fed chief as the former Treasury secretary and National Economic Council director was viewed as likely to remove stimulus faster than other front runners for Ben Bernanke's post when his term ends at the beginning of next year.

Meanwhile, focus on Monday - the fifth anniversary of the Lehman Brothers bankruptcy - was on the Federal Open Market Committee meeting that begins Tuesday. In the face of ongoing mixed economic data, it wasn't clear when the Fed would begin reducing its $85 billion-a-month in asset purchases that are aimed at propping up the credit markets.

The convertible bond market was mostly quiet with most of the trading action in a few large, liquid issues such as Newmont Mining Corp.'s 1.625%% convertible and Cobalt International Energy Inc.'s 2.625% convertibles, which weren't moving significantly price wise.

One trader said that he thought the vibrancy of the convertible market this week would depend on the new issue calendar.

"If there are a lot of new issues, I think it will be busy," the trader said.

Qihoo trades in line

Qihoo's 2.5% convertibles due 2018, which priced Aug. 28, traded down on an outright basis to 111.25 bid, 112 offered versus an underlying share price of $84.00, a New York-based trader said. That compared to where the paper went out on Friday at 114.5 bid, 115.5 offered versus an underlying share price of $90.17.

That was in line, the trader said.

Qihoo shares slid lower by $4.93, or 5.6%, to $82.93 in heavy volume.

Tencent Holdings, China's largest internet company, has agreed to pay $448 million for a 36.5% stake in Sohu's Sogou unit with an option to increase its shares to 40%. The larger player threatens Qihoo and Baidu Inc., the dominant search engine in China.

Allegheny edges up

Allegheny Technologies' 4.25% convertibles due 2014 traded at 103.75 on an outright basis. That was up from a week ago, when the bonds were quoted at 102.75 bid, 103.5 offered versus an underlying share price of $28.35 at the end of the day.

Shares of the Pittsburgh-based specialty metals maker ended up $2.32, or 8%, to $30.95.

The bonds were "up small," a New York-based sellsider said.

Allegheny's tungsten materials business has about $340 million in annual sales with about 1,100 employees at 14 operations around the world.

Green Plains to price

Green Plains plans to sell $75 million of convertible senior notes ahead of the market open on Tuesday at par to yield 3% to 3.5% with an initial conversion premium of 20% to 25%, according to market sources.

Green Plains is an Omaha-based ethanol company.

The Rule 144A offering has a $15 million greenshoe and was being sold by Jefferies & Co., with co-managers Macquarie and Stephens Inc.

The notes are non-callable for three years and then are provisionally callable if shares rise to 140% of the conversion price. There is takeover and dividend protection.

Proceeds will be used for general corporate purposes. The company may use a portion of the proceeds to acquire or invest in additional facilities, assets or technologies. In addition, the company may use a portion of the proceeds to repurchase some of its outstanding 5.75% convertibles through open market repurchases.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

American Realty Capital Properties Inc. Nasdaq: ARCP

Cobalt International Energy Inc. NYSE: CIE

Green Plains Renewable Energy Inc. Nasdaq: GPRE

MetLife Inc. NYSE: MET

Newmont Mining Corp. NYSE: NEM

Qihoo 360 Technology Co. Nasdaq: QIHU

© 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.