Q2 Holdings on tap; NXP Semiconductors active on buyout offer increase; AMAG tops par

By Abigail W. Adams

Portland, Me., Feb. 20 – The convertible bond primary market was active on Tuesday with a new deal announced after the market close.

Q2 Holdings, Inc. plans to price $200 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 22.5% to 27.5%, according to a market source.

Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC are joint bookrunners for the Rule 144A deal, which carries a greenshoe of $30 million. The notes are contingently convertible until Nov. 15, 2022 when they become freely convertible, according to a company news release.

The notes are convertible into cash, shares or a combination of both at the company’s option.

While the primary market prepared for the first new deal of the week, trading volume remained thin in the secondary space with only $322 million in trading volume by dollar amount on the tape by late afternoon.

NXP Semiconductors NV’s 1% convertible notes due 2019 were the most actively traded during Tuesday’s session. The 1% notes jumped about 5 points on an outright basis after Qualcomm Inc. announced Tuesday that it was upping its buyout offer for the company.

AMAG Pharmaceuticals Inc.’s 3.25% convertible notes due 2022 continued to make gains on Tuesday and traded north of 101. Tuesday was the first time since September the notes have traded above par, a market source said.

AMAG has been in focus since Feb. 15 when the pharmaceutical company announced FDA approval for one of its products.

Rayonier Advanced Materials Inc.’s 8% series A mandatory convertible preferred stock due 2019 was up 11.21% by the market close Tuesday after the Jacksonville, Fla.-based chemical company reported fourth-quarter earnings before the market open.

Buyout battles

NXP Semiconductors’ 1% convertible notes due 2019 were the most actively traded in the convertibles space on Tuesday as its stock was among the most actively traded on the Nasdaq.

The 1% convertible notes move on a 50% delta and were unchanged on a dollar-neutral basis, a market source said. However, the 1% notes were up about 5 points outright to trade just north of 129. NXP stock closed Tuesday at $125.56, an increase of 5.96%.

Qualcomm announced Tuesday that it was upping its offer for NXP Semiconductors to $127.50 a share, or $44 billion, from the previous offer of $110.00 per share. Qualcomm also reduced the minimum tender conditions to 70% of NXP shares from 80%.

“This is good for investors,” a market source said. “Especially long-only accounts. They’ll make money.”

The revised offer for NXP has won approval from activist investor Elliott Management and shareholder Soroban Capital Partners LP. Regulatory approval from China and approval from 42% of NXP shares are the last hurdles in Qualcomm closing the long-delayed acquisition.

Qualcomm’s tender offer for NXP shareholders is set to expire on March 5, although the deadline has repeatedly been pushed back, Reuters reported.

As Qualcomm attempts to close its acquisition of NXP, Broadcom’s hostile takeover attempt of Qualcomm continues with a showdown expected at Qualcomm’s 2018 shareholder meeting on March 6.

Broadcom issued a statement Tuesday morning slamming Qualcomm’s board of directors for raising its offer for NXP Semiconductors and stated it would be evaluating its options.

Broadcom has nominated six dissident directors to Qualcomm’s 11-member board to be voted on March 6.

“The cat and mouse game continues,” a market source said.

AMAG breaks par

AMAG Pharmaceuticals’ 3.25% convertible notes due 2022 reached their highest point in recent history on Tuesday, trading as high as 101.6. AMAG stock closed Tuesday at $19.30, an increase of 4.32%.

“These bonds haven’t seen par in a long, long time,” a market source said.

The notes were up about 0.125 to 0.25 point on a dollar-neutral basis, the source said.

The Waltham, Mass.-based pharmaceutical company’s convertible notes and stocks have made gains since Feb. 15 when the company announced FDA approval for one of its products.

The FDA approved a drug-device combination product to reduce the risk of preterm birth in pregnant women that have experienced preterm birth in the past.

AMAG is collaborating on the drug-device product with Antares Pharma Inc. AMAG will produce and supply the drug to Antares, which will assemble and package the device.

The 3.25% convertible notes jumped 10 points to 97 on Feb. 15. Tuesday’s session was the first time the notes have been above par since September, a market source said.

Rayonier’s earnings

Rayonier’s 8% series A mandatory convertible preferred stock due 2019 jumped on Tuesday after the company announced its fourth-quarter and year-end reports prior to the market open.

The par of $100 mandatory convertible preferred stock closed Tuesday at $144.3, an increase of 11.21%.

Rayonier reported net income of $295 million, or $5.01 per diluted share, or non-GAAP net income of $29 million, or 50 cents per diluted share, for the fourth quarter.

Rayonier far exceeded the consensus estimate for non-GAAP earnings per share of 15 cents.

For 2017, Rayonier reported net income of $325 million, or $5.81 per diluted share, or non-GAAP net income of $57 million, or 97 cents per diluted share.

The 8% mandatory convertible preferred stock matures on Aug. 15, 2019. The mandatory convertible preferred stock will be convertible into 6.5923 shares of common stock if the market value of common stock is greater than $15.17.

The preferred stock will convert into 7.7459 shares of common stock if market value is less than $12.91. Rayonier’s common stock closed Tuesday at $20.54, an increase of 12.98%.

Mentioned in this article:

AMAG Pharmaceuticals Inc. Nasdaq: AMAG

NXP Semiconductors NV Nasdaq: NXPI

Q2 Holdings, Inc. NYSE: QTWO

Rayonier Advanced Materials Inc. NYSE: RYAM

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