Southwestern Energy sells upsized convertible preferreds; Intel trades mixed pre-earnings

By Stephanie N. Rotondo

Phoenix, Jan. 15 – The convertibles market was focused on a new $1.5 billion issue from Southwestern Energy Co., a trader reported on Thursday.

“It’s doing really well,” the trader said of the offering of 6.25% $50-par series B mandatory convertible preferred stock.

The issue was up 2 points early in the session, trading around 52, the trader said.

Another trader said the new deal was the “story of the day,” pegging the paper at 51 at the market’s close.

The trader also noted that there was a lot of hedge fund interest in the new issue.

On Wednesday, the deal was being talked at $1.3 billion and was said to be two to three times oversubscribed. The new issue’s dividend came at the wider end of the 5.75% to 6.25% talk and at the tight end of the 17.5% to 22.5% initial conversion premium talk.

The stock underlying the preferreds was up 76 cents, or 3.3%, at $23.78.

BofA Merrill Lynch, Citigroup Global markets Inc., J.P. Morgan Securities LLC, Wells Fargo Securities LLC and BNP Paribas Securities Corp. were the bookrunning managers.

The securities are mandatorily convertible on Jan. 15, 2018. Holders can convert their shares prior to that date at the minimum conversion rate.

Additionally, the holders can convert their holdings upon a fundamental change.

Dividends will be paid on a cumulative basis on the 15th day of January, April, July and October, beginning April 15.

Proceeds will be used to partially repay borrowings under Southwestern Energy’s $4.5 billion 364-day bridge term loan facility.

Southwestern Energy is a Houston-based independent natural gas and oil company.

Elsewhere in the space, a trader said “it’s really quiet away from” the new issue market.

Intel beats estimates

Intel Corp.’s convertible bonds were unchanged to better ahead of the company’s earnings release.

The Santa Clara, Calif.-based chip maker put out its fourth-quarter results after the market closed.

Leading up to the release, the 2.95% convertible notes due 2035 were seen a point higher at 132˝. The 3.95% convertible notes due 2039 were steady, trading with a 174 handle.

As for the equity underlying the bonds, that was down 16 cents at $36.14.

For the quarter, Intel reported net income of $3.66 billion, or 74 cents per share. That compared to a profit of $2.6 billion, or 51 cents per share, the year before.

Analysts polled by Thomson Reuters were expecting earnings per share of 66 cents.

Total revenues improved 6.4% to $14.7 billion.

Revenue at the company’s PC unit was $8.9 billion, up 3%.

Analysts had predicted revenues of $14.71 billion.

For the first quarter of 2015, Intel expects revenue to be between $13.2 billion and $14.2 billion, with gross margins around 60%. Analysts had previously forecast revenue of $13.76 billion, with a gross margin of 61.2%.

Mentioned in this article:

Intel Corp. Nasdaq: INTC

Southwestern Energy Co. NYSE: SWN

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