Xilinx prices, gains on debut; New Plan Excel surges on buyout; XM in line as merger hearings begin

By Kenneth Lim

Boston, Feb. 28 - Xilinx Inc. shot up on its secondary market debut on Wednesday after its new convertible priced at the rich end of talk amid strong demand for the paper.

New Plan Excel Realty Trust Inc. jumped after the company agreed to be bought by Australia-based Centro Properties Group for $3.4 billion in cash.

XM Satellite Radio Holdings Inc. slipped slightly but stayed in line with its stock as congressional hearings related to a planned merger with Sirius Satellite Inc. failed to bring clarity to the deal's chances of success.

The convertible market in general remained active despite a rebound in the stock markets, although volume was thinner compared to Tuesday.

Xilinx gains on debut

Xilinx's new 3.125% convertible junior subordinated debentures due 2037 took off right off the bat on Wednesday amid robust demand despite pricing at the rich end of talk.

The convertible was 101.5 bid, 102 offered against the opening stock price of $26.10. Xilinx stock (Nasdaq: XLNX) eased 1.39% or 36 cents to close at $25.62.

"They did very well," a sellside trader said. "I think it was mostly hedge guys."

Xilinx priced its $900 million offering on Tuesday after the market closed, with an initial conversion premium of 20%.

The debentures were offered at par. They were talked at a coupon of 3.125% to 3.625% and an initial conversion premium of 18% to 20%.

There is an over-allotment option for a further $100 million.

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

Xilinx, a San Jose, Calif.-based maker of electronic equipment and systems, plans to use the proceeds of the deal to concurrently repurchase its common stock through an accelerated share buyback program and from institutional investors in negotiated transactions. It will also use the proceeds to fund general corporate purposes.

A sellside convertible analyst said the deal arrived about 2% cheap even at the rich end.

"It was modeling out really cheap, so it's not surprising that it came at the rich," the analyst said. "They're a good credit and the premium is pretty low for a company like this, which is why people like it."

The analyst said there was initial concern about the structure of the convertible, which ranks junior subordinated and has no puts.

"I know some people think it's too long and it's too much like a preferred," the analyst said. "But I think if you look at it as a preferred, it's actually not bad. Xilinx has solid credit, the volatility is in the mid- to high-20s, the premium is very reasonable."

New Plan Excel jumps on buyout

New Plan Excel's 3.7% convertible due 2011 surged on Wednesday after the company agreed to a $3.4 billion all-cash buyout offer by affiliates of Centro Properties.

The convertible gained about 5 points outright to 111.5 against a stock price of $33.45. New Plan Excel stock (NYSE: NXL) closed at $33.39, up by 13.8% or $4.05.

"Those were really active today," a buyside convertible analyst said. "There's a make-whole premium, so it works out nicely for outright and hedge guys."

New Plan Excel said late Tuesday that it agreed to be bought by affiliates of Centro for $33.15 per share in cash. New Plan Excel is a New York-based real estate investment trust that focuses on shopping centers. Centro will make a cash tender offer for New Plan Excel shares, and the tender offer is expected to close in the second quarter.

The analyst described the deal as a pleasant surprise.

"Just looking at how the market reacted today, I would say most people weren't expecting a deal like this," the analyst said. "There's been some criticism about NXL's slow growth and its markets, so I think a lot of people were hoping that management will come up with something. Selling the company would have been one of the options, and it wasn't that far-fetched with all the consolidation we've seen with REITs."

The analyst said the Centro bid will trigger the make-whole premium on the convertible, which could give holders about an additional three shares of Centro common stock per note depending on when the deal closes.

"The converts are pretty much trading around there right now," the analyst said.

"If you got these converts in September last year, that's 11% in less than a year," the analyst said. "Not bad."

XM in line as hearings begin

XM Satellite Radio's 1.75% convertible due 2009 slipped about a quarter-point but stayed in line on a dollar-neutral basis as hearings began on its planned merger with rival Sirius Satellite Radio.

The convertible traded at 86.75 versus a stock price of $14.40. XM stock (Nasdaq: XMSR) declined by 0.28% or 4 cents to close at $14.36.

Congressional hearings began Wednesday to look into antitrust issues related to the planned merger between Washington-based XM and New York-based Sirius, the only providers of satellite radio in the United States. The House Judiciary Committee on Wednesday said the burden of proof lay with the companies to convince lawmakers that the merger will improve competition. Meanwhile, Sirius chief executive Mel Karmazin, who will be chief executive of the merged company, told the committee that he was open to capping prices for a period of time.

"I don't think you can be certain either way whether the merger will be approved based on today," a sellside convertible analyst said. "But it looks like the lawmakers may take some convincing, so I wouldn't run out and buy anything yet."

© 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.