Morning Commentary: Microchip’s new 1.625% convertibles gain ground; Priceline active, weaker

By Stephanie N. Rotondo

Seattle, Feb. 13 – Microchip Technology Inc.’s 1.625% convertible senior subordinated notes due 2027 were “doing better [Monday] than they were Friday,” according to one convertible debt trader.

He pegged the issue in a 100.5 to 101 range in early dealings, up about half a point.

He noted that the underlying stock (Nasdaq: MCHP) was down 30 cents.

Microchip priced the $1.8 billion issue on Friday, along with $500 million of 2.25% convertible junior subordinated notes due 2037.

Both issues came with a 42.5% conversion premium, which was at the rich end of talk on the 1.625% notes and in the mid-range for the 2.25% paper.

Conversions will be settled with cash, common stock or a combination, at the company’s option. The conversion rate on the 10-year deal is 9.8936 shares per each $1,000 of notes, representing a conversion price of $101.08 per share. The conversion rate on the 20-year deal is 10.0703 shares per each $1,000 of notes, equaling a conversion price of $99.30.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC, BofA Merrill Lynch, BMO, HSBC and U.S. Bank ran the books.

Away from the new deal, Priceline Group Inc.’s 1% convertible notes due 2018 were both active and lower at mid-morning, though there was no fresh news to act as a catalyst.

A trader placed the convertible paper around 174, down about a point.

As for the equity (Nasdaq: PCLN), it was up $1.06 at $1,647.57.

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