New Equinix adds 2 points in the gray; existing Equinix mixed; CMS, Callaway Golf to price

By Rebecca Melvin

New York, June 8 - The new convertible deal launched by Equinix Inc. early Monday looked "decent" to convertible players who bid it up 2 points in the gray market ahead of pricing, which came after the close.

Final pricing of the Equinix deal came at the cheap end of talk.

Two existing Equinix convertibles were mixed in trade.

Also launching new deals were CMS Energy Inc., which was expected to price $150 million of 20-year convertible senior notes after the close Tuesday, and Callaway Golf Co. planned to price $110 million of convertible preferred shares in a Rule 144A deal.

The Callaway deal represents the first convertible perpetual preferred to come to market since the sentiment revived earlier this year following the virtual shutdown after the bankruptcy of Lehman Brothers Holding Inc. in mid-September.

"We're starting to move out the tenor curve," a New York-based syndicate source said. "We started out with three years with Newmont Mining; then we did five years, today's deal was seven and now this is the first perpetual."

Back in established issues, Intel Corp.'s 2.95% convertibles were down 2 to 3 points, dropping to 80 after earlier trades at 83.25. Shares of the Santa Clara, Calif. chip giant ended the session unchanged at $15.92, after slipping slightly earlier.

Steel Dynamics Inc.'s 5.125% convertibles, which priced last week, were also lower, trading at 105.50 versus a share price of $14.25, compared to 106.5 against a stock price of $14.50 on Friday. The company priced its upsized $250 million offering at the rich end of talk earlier that week.

Shares of the Fort Wayne, Ind.-based steel producer ended the session up fractionally at $14.83.

Equinix prices on the cheaps

Equinix priced an upsized $325 million of convertibles decidedly on the cheap end after the market close Monday.

The new Equinix 4.75% convertibles, talked to yield 4.25% to 4.75% with a 17.5% to 22.5% initial conversion premium, were seen 2 points over issue price in the gray market before final terms were set.

They were "decent," according to one New York-based sellside analyst, who used a credit spread of 700 basis points over Libor to value the paper ahead of pricing.

Initially the deal was expected to be $250 million in size.

The subordinated notes are registered, and joint bookrunners Citigroup, JP Morgan and Goldman Sachs, have been granted an over-allotment option to purchase up to an additional $48.75 million of notes.

The notes are non-callable with no puts, with dividend and takeover protection.

Proceeds will be used to fund a call spread and for capital expenditures and general corporate purposes.

Foster City, Calif.-based Equinix is a network information technology services provider

Existing Equinix issues mixed

Meanwhile, Equinix's 3% convertibles due October 2014, a nearly $400 million issue when it was priced in September 2007, dropped about 5 points in trade to 81.125 or 81. 5 versus a share price of $72.

But the Equinix 2.5% convertibles due April 2012, which were sized at $250 million when they priced in March 2007, traded at 91.50 and 91.875, which was about 4 points better.

Equinix is a tech name, a sector that has been out of favor of late in the convertibles market.

In terms of biggest face value, consumer discretionary was the biggest sector in convertibles issuance last month, and for the year-to-date the biggest convertibles sector is materials, a New York-based sellside analyst said.

He said that there has been no noticeable sector rotation into technology names.

CMS to price Tuesday

Jackson, Mich.-based electric and gas utility CMS Energy was expected to price $150 million of 20-year convertible senior notes after the close Tuesday.

The paper was expected to yield 5% to 5.5%, with a 22.5% to 27.5% initial conversion premium.

CMS also plans to price $300 million of 10-year senior straight notes.

There is a greenshoe of $22.5 million of convertibles, which are being sold via bookrunner Barclays Capital Inc.

The proposed offerings will be used to retire existing indebtedness.

The convertibles are non-callable for five years, with puts in years five, 10 and 15. There is contingent conversion subject to a 130% pricing hurdle.

Callaway to price

The Carlsbad, Calif.-based maker of golf clubs said after the close Monday that it planned to price $110 million of convertible preferred shares to qualified institutional buyers pursuant to Rule 144A.

Lazard Capital Markets was thought to be bookrunning, but that was not confirmed by press time.

The preferred stock, with a $1,000 liquidation preference, will be convertible into shares of the company's common stock.

Proceeds will be used to pay down a portion of the company's indebtedness outstanding under its existing revolving line of credit.

Mentioned in this article

Callaway Golf Co. NYSE: ELY

CMS Energy Inc. NYSE: CMS

Equinix Inc. Nasdaq: EQIX

Intel Corp. Nasdaq: INTC

Steel Dynamics, Inc. Nasdaq: STLD

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