New JinkoSolar convertible gains; SolarCity jumps outright; SanDisk paper flat on hedge

By Rebecca Melvin

New York, Jan. 16 - JinkoSolar Holding Co. Ltd.'s newly priced 4% convertibles due 2019 traded up a few points despite lower shares on their debut in secondary market trading Thursday after the China solar company priced an upsized $130 million of the five-year convertible notes at the midpoint of talk.

The new JinkoSolar convertibles were seen at 102 bid, 102.625 offered versus an underlying share price of $35.76 early Thursday, according to a Connecticut-based trader. The shares ended weaker from that level at $35.39, or down 2.4%, and the bonds were probably around 103, a second trader said.

"It's a good sign that the deal got done, upsized and priced within talk," a New York-based syndicate source said.

The JinkoSolar deal was initially talked at $100 million in size.

In terms of the U.S. primary convertible market in general, it has been quiet for 2014 so far, with market players pointing to the quiet period for companies ahead of earnings reports as part of the reason for the lull and also the fact that there was a big push to get deals done before 2013 ended, which depleted the pipeline somewhat.

"Historically, January is not a very busy month, and companies have been focused on other things," a syndicate source said. He predicted issuance would get going in earnest by early February.

Meanwhile, European deals have begun to flow already. On Thursday, Spain's Acciona SA launched and priced €325 million of five-year convertible bonds at a 3% coupon and 32.5% initial conversion premium. Last week, Brussels-based Econocom Group SA/NV priced €175 million of 1.5% five-year convertible bonds with an initial conversion premium of 33%.

Back in the United States, the syndicate source admitted, "It's slower than normal, but we do have a pipeline and a lot of dialogue is going on right now."

He expects significant issuance to hit in a couple of weeks, but in the meantime, in light of the "access" last year, with 143 separate transactions and issuance that was up 120% at $47 billion, it's not unusual that there would be a subsequent lull.

Back in secondary action, several names continued higher on Thursday that were active on Wednesday.

SolarCity Corp.'s convertibles jumped with the underlying shares again on Thursday, although the bonds appeared to lose a little steam later in the session. Investors were cheered by initiated coverage at a "buy" rating from Deutsche Bank, which also set a price target on the shares of $90.00, amid expectations that the company's residential solar panel leasing market will roughly double in 2014.

SanDisk Corp.'s 1.5% convertibles due 2017 were also a little higher in active trade, although flat on a dollar-neutral, or hedged, basis, as investors appeared to be moving out of SanDisk's newer convert into the attractive 1.5% bonds, a trader said.

JinkoSolar trades up

JinkoSolar's new 4% convertibles due 2019 traded early Thursday at 102 bid, 102.625 offered versus an underlying share price of $35.76.

At the close, the bonds were seen near 103 with the shares ending lower at $35.39, or down 2.4%.

"This is an $800 million company, and a couple of the smaller, China companies really struggled to get deals done late last year," a syndicate source said. The larger China plays didn't struggle, but the smaller ones did, he said, so the upsized, new JinkoSolar deal, pricing at the midpoint of talk was viewed very positively.

Still, there was limited investor interest in the deal given that it is a China play and there was limited stock borrow ahead of pricing.

But the fact that it came with a concurrent offering of common stock helped things a lot, the syndicate source said.

A second source said the deal had a "specific set of buyers."

The solar products manufacturer also priced an upsized $132,188,000 of American Depositary Shares, or 3.75 million of shares at $35.25 each. The offering was initially talked at 2.75 million ADS in size.

The convertibles have a $20 million greenshoe and were sold via Credit Suisse Securities (USA) LLC as the bookrunner.

The notes are non-callable for three years, with a put at year three.

Proceeds will be used for general corporate purposes, including expansion of manufacturing capacity, development of solar projects and working capital. The company may also use proceeds to invest in short-term, marketable instruments.

JinkoSolar is a solar products manufacturer based in Shangrao, China. It's older 4% convertibles due 2016 were not heard in trade.

SolarCity adds again

SolarCity's 2.75% convertibles due November 2018 surged to 142 early Thursday from 133 to 133.5 on Wednesday and from 128.5 to 130 on Tuesday.

Late Thursday, the bonds were around 141 to 141.5, according to Trace data.

SolarCity shares surged $8.30, or 12%, to $76.80.

It wasn't known how the bonds, which have a delta of about 80%, moved on a dollar-neutral, or hedged, basis.

"This is another one without a hard borrow, so it's difficult to gain much traction," one trader said.

He said he felt the company was benefiting from the upgrade and also from the fact that it's associated with Tesla Motors Inc., and the two companies share the same chief executive, Elon Musk.

"There's always a lot of hoopla around that," he said.

SanDisk flat on hedge

SanDisk's 1.5% convertibles due 2017 were last seen at 151.5 bid, 152 offered with the underlying shares at about $73.15, a trader said.

That was up slightly on an outright basis, but the bonds are held on a delta of about 84% to 85%, and with the SanDisk shares ending up 61 cents, or 0.8%, at $73.07, the bonds were seen about flat.

"This one was interesting and pretty active as investors moved out of the new bonds into the 1.5% convertibles," the trader said.

Mentioned in this article:

Acciona SA Madrid: ANA

Econocom Group SA/NV Brussels: ECONB

JinkoSolar Holding Co. Ltd. NYSE: JKS

SanDisk Corp. Nasdaq: SNDK

SolarCity Corp. Nasdaq: SCTY

© 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.