GT Advanced, Endologix gain on hedge; SouFun, American Realty mostly in line; RAIT drops

By Rebecca Melvin

New York, Dec. 5 - The convertible bond market saw six new deals in trade Thursday. The most actively traded issue was GT Advanced Technologies Inc.'s newly price 3% convertibles, which gained on an outright and hedged, or dollar-neutral, basis after being released for secondary dealings.

The Merrimack, N.H.-based solar equipment company priced an upsized $190 million of the seven-year convertibles beyond the rich end of tightened talk for the premium.

"They did extremely well, especially in the morning with the stock up. They simmered down in the afternoon," a New York-based trader said. He said the new bonds gained 1.5 points on a dollar-neutral basis.

Endologix Inc.'s newly priced 2.25% convertible senior notes also did well, gaining 1.75 points on a dollar-neutral basis as shares moved lower after the Irvine, Calif.-based developer of aortic disorder treatments priced $75 million of the five-year convertibles at the rich end of talk.

SouFun Holdings Ltd.'s new 2% convertibles were said to have performed "in line to weaker" by a syndicate source after the Beijing-based real estate internet company priced an upsized $350 million of the five-year convertibles at the midpoint and rich end of talk.

American Realty Capital Properties Inc. priced two deals, including an upsized $350 million of new seven-year bonds, which traded late in the session at 99.5 to par with the underlying shares of the New York-based real estate investment company down a little.

American Realty also priced an upsized $250 million add-on to its 3% convertibles due 2018 at par early Thursday. That paper traded down about a point on a dollar-neutral basis to the same 99.5 to par level.

"It traded down as one expects with an add-on," a New York-based trader said.

The last new deal of the day was definitely weaker. RAIT Financial Trust's new 4% convertibles, which priced at a 99 discount to par, slipped lower to the 97 context after the Philadelphia-based REIT priced $125 million of the 20-year bonds at the fixed terms that were talked ahead of pricing.

"The RAS was trading down," a trader said.

Also on Thursday, HCI Group Inc. launched an offering of $100 million of five-year convertibles via bookrunning manager JMP Securities with co-managers Sterne Agee & Leach, Inc. and Gilford Securities. The Tampa, Fla.-based property and casualty insurer was expected to price the deal after the market close at 3.375% to 3.875% coupon talk and 30% to 35% premium talk.

The underwriters put out a credit spread of 500 basis points over Libor and 35% volatility for valuation inputs for the deal.

GT Advanced adds on debut

GT Advanced's new 3% convertibles due 2020 traded up early on at 102 bid, 103 offered versus an underlying share price of $8.92. The deal was seen higher by 1.375 points on a dollar-neutral, or hedged, basis versus an underlying share price of $8.92.

Even though trading slowed later in the session and shares ended lower by about 1%, the deal was still seen better by about 1.5 points on a dollar-neutral basis at day's end, using a delta of about 75%.

"It has a big ratio, so small movements in the stock make big moves in the bonds," a trader said.

GT Advanced priced an upsized $190 million of the seven-year convertibles to yield 3% with a 40% initial conversion premium. It also priced a downsized 8.65 million shares of common stock at $8.65 each.

Given where shares are, and with premiums widening out some, issuers are finding the convertible bond a positive addition to their capital structure.

A greenshoe may add up to $24 million to the deal, which was priced via Morgan Stanley & Co. LLC and Goldman Sachs & Co. as joint bookrunning managers. Canaccord Genuity Inc. was a co-manager.

Proceeds will be used for working capital and general corporate purposes, which may include acquisitions and capital expenditures.

Merrimack, N.H.-based GT Advanced Technologies is a provider of equipment and services that support the growth of the solar and LED industries.

American Realty does OK

American Realty's new 3.75% convertibles due 2020 were quoted at 99.5 bid, 100 offered at the end of the day.

Coincidently, the American Realty add-on of 3% convertibles due 2018 was also quoted at 99.5 bid, 100 offered.

American Realty shares ended the session down 27 cents, or 2%, to $12.90.

One trader thought that a couple of things were working against the New York-based REIT, including tight borrow given the two concurrently priced deals and the fact that there is uncertainty related to merger and acquisition activity currently underway for the company.

"It seemed like it was going to be stronger in the morning. But there are a couple of things going on like tight borrow and its investment-grade rating. Those kind of things are going to help it balance out," a New York-based trader said.

The company is closing at least three acquisitions, and once at least one of those things goes through, there will be more clarity on the operating structure," he said.

The REIT's asset portfolios focus on single-tenant properties.

Mentioned in this article:

American Realty Capital Properties Inc. Nasdaq: ARCP

Endologix Inc. Nasdaq: ELGX

GT Advanced Technologies Inc. Nasdaq: GTAT

HCI Group Inc. NYSE: HCI

RAIT Financial Trust NYSE: RAS

SouFun Holdings Ltd. Nasdaq: SFUN

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