Convertibles slip; Steel Dynamics active ahead of maturity; Verint Systems paper on tap

By Rebecca Melvin

New York, June 9 – U.S. convertibles were modestly lower on Monday, with many names coming for sale as market players eyed the potential of new deals coming after the market close or in the coming days, a New York-based trader said.

“We’re hearing some deals pricing, and people are getting ready for new paper,” the trader said. There are also potential deals coming out of Europe, he said.

“It seemed like most things were off by about 0.25 point across the board,” the trader said.

After the market close Melville, N.Y.-based security and surveillance company Verint Systems Inc. launched an offering of $300 million of seven-year convertibles and also a stock deal that was seen pricing late Thursday.

Back in the secondary market, trading was thin, making it difficult to discern particular themes about what was selling and by how much, a second New York-based trader said.

In addition to new paper pricing this week, the market is digesting more than $2 billion of new paper that came to market last week, including $1.675 billion of new deals that were released for secondary market trading on Friday.

Starwood Property Trust Inc.’s 4.55% convertibles traded down about a point on an outright basis with the shares of the Greenwich, Conn.-based mortgage loan investor lower by 16 cents, or 0.7%. The notes were seen lower by about 0.25 point on a hedged basis.

Janus Capital Group Inc.’s 0.75% convertibles due 2018 traded at 126.35, which was down 4 points outright, with shares of the Denver-based asset management company ending lower by 26 cents, or 2%, at $12.26.

Steel Dynamics Inc.’s 5.125% convertibles, which mature June 15, were trading actively at about parity, a New York-based trader said. Shares of the Fort Wayne, Ind.-based steel company were down about 1.6%.

Trace data recorded the bonds trading late Monday at 101.685, which was down 1.3 points.

Endeavour International Corp.’s 5.5% convertibles due 2016 were said to be quiet despite another sharp drop in the underlying shares of the Houston-based oil and gas company in the early going on Monday. The latest stock slide has been sparked by regulatory filings concerning its new stock incentive plan.

Also among distressed names, Atlanticus Holdings Corp.’s 5.875% convertibles due 2035 were pulled into trade amid a 6% drop in the underlying shares of the Atlanta-based financial services provider. The convertibles changed hands at 41, according to Trace data, which was within the previous trading range. The Atlanticus shares recouped most of their early losses to end lower by 2 cents, or 0.7%, at $2.82.

Equities edged higher. The Dow Jones industrial average ended up 18.82 points to 16,943.10; the S&P 500 stock index added 1.83 points to end at 1,951.27; and the Nasdaq stock market gained 14.84 points, or 0.3%, to 4,336.245.

Starwood comes in

Starwood Property Trust’s 4.55% convertibles due 2018 traded at 113.417, which was down nearly 1%. That was off by 0.25 point on hedge.

Starwood shares edged lower by 16 cents, or 0.7%, at $24.25.

There didn’t appear to be any particular news driving trade in the mortgage loan investor, but it was weaker both outright and on a hedged basis, a trader said.

All in all, the market was pretty quiet on Monday, the trader said in response to whether the moves were sector related.

Verint to price

Verint plans to price $300 million of seven-year convertibles this week that were talked to yield 1.75% to 2.25% with an initial conversion premium of 30% to 35%, according to a syndicate source. Pricing was expected to occur Thursday after the market close.

Verint is also pricing 5 million shares of common stock. The two offerings are not contingent upon each other.

The notes offering has a $45 million greenshoe and was being sold via joint bookrunners Deutsche Bank Securities Inc., Credit Suisse Securities (USA), RBC Capital Markets LLC, Barclays, Goldman Sachs & Co. and HSBC Securities (USA) Inc.

The notes are non-callable. They are convertible if shares exceed 130% of the conversion price for a specified period.

Proceeds of both the notes and stock offerings will be used to repay amounts outstanding under its existing credit facility. Proceeds will also be used to fund the net cost of convertible note hedge and warrant transactions, or a call spread, that are being transacted in conjunction with the notes.

Melville, N.Y.-based Verint is a software and hardware analytics company providing security, surveillance and business intelligence.

Mentioned in this article:

Atlanticus Holdings Inc. Nasdaq: ATLC

Endeavour International Corp. NYSE: END

Janus Capital Group Inc. NYSE: JNS

Starwood Property Trust Inc. Nasdaq: STWD

Steel Dynamics Inc. Nasdaq: STLD

Verint Systems Inc. Nasdaq: VRNT

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