PROS Holdings on tap; NXP Semiconductors convertibles eyed; Chegg expands post-earnings

By Abigail W. Adams

Portland, Me., April 30 – While convertibles primary market activity has slowed during earnings season, it has not stopped. One new deal was on deck.

PROS Holdings Inc. plans to price $125 million of five-year convertible notes prior to the market open on Wednesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Deutsche Bank Securities Inc. and Goldman Sachs & Co. LLC are bookrunners for the Rule 144A deal, which carries a greenshoe of $18.75 million.

Proceeds from the offering will be used, in part, to repurchase, redeem or retire the Houston-based software company’s 2% convertible notes due Dec. 1, 2019.

Meanwhile, the convertibles secondary space was active on Tuesday with earnings related news pushing outstanding issuances into the spotlight.

NXP Semiconductors NV’s 1% convertible notes due Dec. 1, 2019 were in focus as stock soared post-earnings.

The 1% convertible notes were making gains on an outright basis and were either slightly improved or slightly contracted dollar-neutral based on the delta used, a market source said.

Chegg Inc.’s 0.125% convertible notes due 2025 also saw high-volume activity following the education technology company’s first-quarter earnings report.

While the notes dropped outright, they were expanding dollar-neutral on the move down.

Short-duration notes were also in focus on Tuesday with Spirit Realty Capital Inc.’s 2.875% convertible notes due May 15, 2019 and Arconic Inc.’s 1.625% convertible notes due Oct. 15, 2019 active although largely unchanged.

NXP’s earnings

NXP Semiconductors’ 1% convertible notes due Dec. 1, 2019 were in focus as stock soared post-earnings.

The 1% notes were up 3.5 points outright and were changing hands around 110.375.

The notes were contracted about 0.375 point to 0.5 point on a dollar-neutral, or hedged, basis based on the theoretical delta, a market source said.

However, the notes may have expanded based on the market delta with people playing the name with a lighter hedge due to the short duration of the notes.

Another source saw the notes contracted about 0.125 point to 0.25 point dollar-neutral.

The notes did not see more of a change because the earnings results and subsequent stock move were largely in line with expectations, a source said.

While the notes saw high-volume activity on Tuesday, the movement in the notes was “relatively boring,” the source said.

The 1% notes were among the most actively traded during Tuesday’s session with $15 million in reported volume about one hour into the session.

Volume climbed to $25 million by the late afternoon.

Despite the short lifespan of the notes, there was a good mix of outright and swap trades.

About ¼ of the trades early in the session were on swap, a source said.

NXP Semiconductors’ stock traded as high as $107.69 before closing the day at $105.71, an increase of 7.98%.

Stock soared following NXP’s first-quarter earnings report. NXP reported first-quarter earnings per share of $1.95 versus analyst expectations for earnings per share of $1.55.

Revenue was $2.09 billion, which was in line with analyst expectations.

NXP also released strong second-quarter guidance with anticipated revenue of $2.15 billion to $2.25 billion. Analysts were anticipating revenue of $2.15 billion.

Chegg expands

Chegg’s 0.125% convertible notes due 2025 also saw high-volume activity following the education technology company’s first-quarter earnings report.

The 0.125% notes dropped about 3 points outright to change hands at 97 early in the session. The notes closed the day just shy of 96.

However, the notes expanded about 0.5 point to 0.625 point on the move down, a market source said.

There were several swap trades on the tape.

The 0.125% notes were also expanding during Monday’s session in the run up to the earnings report with the notes improved about 0.25 point dollar-neutral, a market source said.

Chegg stock closed Tuesday at $35.65, a decrease of 10.22%.

Stock tanked despite an earnings beat on both the top and bottom lines.

Chegg reported earnings per share of 15 cents versus analyst expectations of earnings per share of 12 cents.

Revenue was $97.4 million versus analyst expectations for revenue of $94.8 million.

Short-duration notes active

Short-duration notes continued to be active on Tuesday with the notes looking better to buy recently, a market source said.

Arconic’s 1.625% convertible notes due Oct. 15, 2019 saw a flurry of activity on Tuesday with the notes changing hands around 99.5.

While active, the notes were largely unchanged, a market source said.

Arconic stock closed Tuesday at $21.48, an increase of 3.87%.

Spirit Realty Capital’s 2.875% convertible notes continued to see high-volume activity as the notes approach their maturity date of May 15.

The 2.875% notes were also unchanged at just below par, a market source said.

The notes have seen high-volume activity over the past few sessions as their maturity date approaches.

Buyers were moving in for the yield, a source said.

Mentioned in this article:

Arconic Inc. NYSE: ARNC

Chegg Inc. NYSE: CHGG

NXP Semiconductors NV Nasdaq: NXPI

PROS Holdings Inc. NYSE: PROS

Spirit Realty Capital Inc. NYSE: SRC

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