MolyCorp plans to sell $300 million convertibles; EA, Coinstar paper boosted on sale talk

By Stephanie N. Rotondo

Phoenix, Aug. 16 - News was driving a lot of activity in the convertible bond market Thursday, and volume remained moderate, according to a trader.

MolyCorp Inc. announced a new offering, a $300 million issue of convertible senior notes due Sept. 1, 2017. The deal was expected to price after the bell but had not come as of press time. A trader said the deal was being talked to yield 5.5% to 6%, with a 20% to 25% initial conversion premium.

The new issue was driving the existing issues higher.

Meanwhile, Electronic Arts Inc.'s convertibles saw "big volume," a trader said, on news the company might soon be acquired by private equity firms.

Coinstar International Inc., the operator of RedBox, was also moving up on word of a possible sale.

A decline in net income resulted in losses for CACI International Inc.'s convertible debt. A trader said the bonds' losses were "right in line" with dips in the stock.

MolyCorp plans deal

MolyCorp is planning a $300 million sale of convertible senior notes due Sept. 1, 2017, the company said on Thursday.

The company also intends to include a $45 million over-allotment option, according to a press release.

A trader said the company's older issue - the 3.25% convertible notes due 2016 - were edging higher on the news.

"They were trading fairy regularly [in a 66-67 context]," he said. After the announcement, the issue moved up to a 71 to 73 context.

However, the news didn't do any favors for the stock.

"The stock hit a 52-week low," according to a trader.

The equity dropped 90 cents, or 7.46%, to $11.16.

The note offering is taking place concurrently with a $288 million common stock sale.

Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC are the joint bookrunners.

Proceeds will be used to fund operating expenses, working capital, capital expenditures and any other cash requirements through the first half of 2013. This includes cash payments on debt coming due in August due to an exercise of certain buyout and conversion rights triggered via a change of control.

MolyCorp is a Greenwood Village, Colo.-based rare earth metals exploration company.

EA boosted by PE chatter

Reports that Electronic Arts was in discussions with private equity firms regarding a takeover resulted in "big volume" for the company's convertible bonds, a trader said.

"A ton traded," he said.

He called the 0.75% convertible notes due 2016 up 2¼ to 2¾ points, trading in a 92.375 to 92.75 context.

Another trader pegged the issue at 92.75 bid, 93 offered versus a stock price of $14.02.

The stock ended the day at $13.81, up 72 cents, or 5.5%.

The New York Post reported Thursday that the Redwood City, Calif.-based videogame publisher had begun talks with private equity firms KKR and Providence Equity Partners for a potential $20-per-share takeover deal.

The company's stock has dropped 36% this year alone, as the publisher aims to enter the online gaming industry in order to better compete with rivals like Zynga Inc.

Sale talk helps Coinstar

A possible sale at Coinstar International meantime helped that company's convertible debt drive higher.

A trader said the 4% convertible notes due 2014 were trading at 145.625 versus a stock price of $53.75.

The equity finished up $3.66, or 7.59%, at $51.88.

The New York Post was again behind the sale talks, reporting that the company was interested in selling itself. The article alleged that the company has been in talks with private equity investors for a few months and that negotiations were kicking into high gear.

Coinstar operates RedBox, the kiosk DVD-rental platform found in many grocery and convenience stores. RedBox makes up about 90% of Coinstar's revenue.

Reuters followed up on the report, speaking with several analysts who doubted the validity of the claim. One analyst noted that if the company was in fact looking to sell itself, perhaps it only wanted to sell part of itself - specifically, its coin-counting unit.

CACI weakens

A trader said weak earnings were driving CACI International's 2.125% convertible notes due 2014 - as well as its equity - lower on Thursday.

The trader said the bonds fell "right in line" with the stock, placing the issue at 113.25 versus a share price of $53.41.

The stock finished the day at $53.23, down $4.15, or 7.23%.

The government information technology contractor reported its fiscal fourth-quarter results after the market closed on Wednesday. For the quarter, net income dropped 5.5% to $43.4 million, or $1.59 per share, and revenues declined 1% to $963.2 million.

Analysts had been expecting a profit of $1.50 per share on revenues of $959.4 million.

The increase to the per-share profit was due in large part to a series of stock buybacks.

Mentioned in this article:

MolyCorp Inc. NYSE: MCP

Electronic Arts Inc. Nasdaq: EA

Coinstar International Inc. Nasdaq: CSTR

CACI International Inc. NYSE: CACI

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