FXCM adds on debut; planned Concur, NetSuite look fine; Ryland drops; Priceline on tap

By Rebecca Melvin

New York, May 29 - FXCM Inc.'s newly priced 2.25% convertibles traded up on both an outright and dollar-neutral, or hedged, basis on Wednesday after the New York-based foreign exchange trading firm priced an upsized $150 million of five-year convertible senior notes at the rich end of talk.

There were two additional deals being marketed during the session that were deemed to be appropriately priced given the convertible bond market's current strength. Concur Technologies Inc. was to price $350 million of five-year convertible senior notes, and NetSuite Inc. was to price $270 million of five-year convertibles. Both were talked to yield 0.5% to 1% with an initial conversion premium of 27.5% to 32.5%.

Concur's existing 2.5% convertibles due 2015 slipped.

Elsewhere, Ryland Group Inc.'s 0.25% convertible bonds, which priced two weeks ago, traded down sharply on swap. But Smithfield Foods Inc.'s convertibles jumped outright on news that China's Shuanghui Group, a meat producer, has offered to buy out the Smithfield, Va.-based pork producer for $4.8 billion.

Smithfield shares surged 28%. But the convertibles - although they gained 17 points or so - were seen as unaffected since the paper matures next month, and the averaging period, the method by which pricing is set, has already begun.

After the market close, Priceline.com Inc. launched an overnight offering of up to $1 billion of seven-year convertible senior notes that were seen being reoffered at 98.5 to 99.

Overall, the convertible market was called somewhat weaker due to the new issuance and interest rate moves.

Upsized FXCM adds

FXCM's upsized 2.25% convertibles traded up Wednesday to 102 bid, 102.5 offered versus an underlying share price of $14.17. A syndicate source quoted the paper at 102 versus an underlying share price of $14.13 during the session.

That was up about 2 points on both an outright and hedged basis on a delta of about 60% to 65%.

They did pretty well, sources said. "It's definitely an aggressive buying market right now," a market source said.

FXCM shares edged down to $14.06, which was down a dime, or 0.7%.

The Rule 144A deal was initially talked at $125 million in size but was upsized to $150 million. The $22.5 million greenshoe was upsized from $18.75 million.

Pricing came at the tight, or rich, end of talk, which was for a 2.25% to 2.75% coupon and a 27.5% to 32.5% premium.

Even so, the deal bettered most valuations, which were calculated on the basis of the midpoint of talk.

Using a credit spread of 450 basis points over Libor and a 30% vol., the deal was seen only 1% cheap, or 101, at the midpoint of talk before the deal was released for secondary market trading.

The underwriters were using a 32% vol., which made the deal 2.3% cheap at the midpoint of talk, sources said.

Others used a 450 bps credit spread and 30% vol., which was "about where the consensus was," an East Coast-based buysider said.

Credit Suisse Securities (USA) LLC, BofA Merrill Lynch and Morgan Stanley & Co. LLC were the joint bookrunners.

A call spread was established in connection with the notes offering, under which FXCM entered into convertible note hedge and warrant transaction with affiliates of initial purchasers of the notes. The strike price on the warrant transactions will initially be $21.24, which raises the effective initial conversion premium from the issuer's perspective to 50%.

The notes are non-callable.

Proceeds will be used to repay borrowings under a revolving credit facility and for general corporate purposes, including potential future acquisitions and also to pay the net cost of a call spread.

Concur, NetSuite to price

Not much was heard on the planned issues in the market on Wednesday. One New York-based sellsider said, "Both have been radio silent."

An East Coast-based buysider said that both deals were appropriately priced given strong investor demand and given a raft of upcoming maturities in the secondary market that portfolio managers are scrambling to replace.

Concur Technologies' $350 million of convertibles were seen pricing after the market close Wednesday with a 0.5% to 1% yield and a 27.5% to 32.5% initial conversion premium via joint bookrunners Credit Suisse Securities, J.P. Morgan Securities LLC and Deutsche Bank Securities Inc.

The Redmond, Wash.-based expense-management software company has a market capitalization of $4.45 billion.

Concur shares pared early losses to end down 21 cents, or 0.3% at $81.96.

NetSuite's planned $270 million of five-year convertible senior notes were also seen pricing after the market close Wednesday at 0.5% to 1% yield and 27.5% to 32.5% premium via joint bookrunners JPMorgan and Barclays, with JMP Securities acting as a co-manager.

The San Mateo, Calif.-based provider of cloud-based financials and enterprise resource planning software has a $6.4 billion market capitalization.

NetSuite shares fell $3.52, or 3.9%, to $86.00.

Existing Concur slips

Concur 2.5% convertibles due 2015 were seen last on Wednesday at 162 to 162.5 versus an underlying share price of $82.50. Last week, the paper was seen at about 165.75 versus an underlying share price of $83.93.

The existing Concur issue, which priced in April 2010, looked to have come in about 0.75 point on a dollar-neutral basis in the last week to week-and-a-half. The convertibles trade on a 92% delta.

"Other names have been trading 'in' over the last few days, as well," a New York-based convertibles analyst said. "Things have come in as a few new issues have hit the market."

Ryland down, Smithfield up

Ryland's 0.25% convertibles due 2019, which price about two weeks ago on May 14, were seen having "come in" about 1.5 points on a hedged basis on Wednesday alone to 97 bid, 98 offered versus an underlying share price of $46.40.

The cause of the drop was unknown. But possibly some holders were lightening up on the paper and reallocating it into other balanced names that have come in in recent days, an East Coast buysider said.

Other bonds have more equity upside to offer, he said. The convertibles of Toll Brothers Inc., for example, might be an alternative.

Smithfield's 4% convertibles due June 30, 2013 zoomed up 17 points to trade at 130.75, according to Trace data. Shares of the Smithfield, Va.-based company rose $7.38, or 28%, to $33.35.

The Smithfield convertible bonds, which mature June 30, were not seen being impacted by the proposed acquisition, given that the averaging period, or the method that the bonds are settled based on an average price going into maturity, has already started, a market source said.

Priceline to price

Priceline.com, the Norwalk, Conn.-based online travel agency, and something of a serial convertible issuer, launched a new offering of up to $1 billion of seven-year convertible senior notes after the market close Wednesday that were talked with a 0.35% coupon and a 66% initial conversion premium.

The overnight deal was expected to be reoffered at 98.5 to 99, pushing the effective yield to 0.5% to 0.57%, and the effective premium to 63.5% to 64.3%.

The Rule 144A notes were being priced via bookrunner Goldman Sachs & Co.

The convertibles are non-callable for life, with dividend and takeover protection. There's a $150 million greenshoe.

Proceeds are expected to be used to repurchase up to $450 million of common stock in privately negotiated, off-market transactions and to repurchasing shares in the open market or in private transactions, and also for general corporate purposes, which may include repayment of outstanding debt and for corporate acquisitions.

In connection with the offering, the company's board authorized a $1 billion share repurchase program.

Mentioned in this article:

Concur Technologies Inc. Nasdaq: CNQR

FXCM Inc. Nasdaq: FXCM

NetSuite Inc. NYSE: N

Priceline.com Inc. Nasdaq: PCLN

Ryland Group Inc. NYSE: RYL

Smithfield Foods Inc. NYSE: SFD

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