Upsized SunPower ‘up marginally’ on swap; older SunPower weak; Ciena better, stock sinks

By Rebecca Melvin

New York, Dec. 10 – SunPower Corp.’s newly priced 4% convertibles traded down to a low print of 97.875 in the early going on Thursday but recovered some later in the session along with better stock pricing after the San Jose, Calif.-based solar company priced an upsized $400 million of the seven-year senior debentures at the cheap end of talked terms.

The SunPower deal was initially talked at $350 million in size.

On a swap basis, the bonds were flat to “up marginally,’ a New York-based trader said. The performance was in line with that of Harmonic Inc.’s 4% convertibles, which debuted in the market on Wednesday and traded around 100 to 100.5 after the $125 million of the five-year senior notes priced beyond the cheap end of talk.

“The SunPower deal came, and it was cheap, but both through liquidity and through pricing, it didn’t do that well,” the trader said.

The older Sunpower 0.75% convertibles traded early at 111 versus a share price of $23.04, which was down about 2 points on a dollar-neutral, or swap, basis. But they were seen to have contracted by only about a point against the closing share price of $22.39, which was down 65 cents, or 2.8%.

The SunPower 0.875% convertibles traded at 79, which was also down a bit, a New York-based trader said.

Elsewhere, SunEdison Inc. remained a name in trade with shares extending gains by about 3% to $4.09 after spiking 15% on Wednesday. Shares are better after the company announced a restructured agreement to acquire Vivint Solar Inc., but the convertibles are not significantly affected by that change.

“It is significant in that they are paying out less cash, but it doesn’t solve their credit woes,” a trader said about the amended acquisition agreement.

“There is still a lot of danger and fear in that they are not going to be able to pay. With the bonds in the 30s, you get a lot of people thinking a filing is on the horizon,” the trader said, referring to a potential Chapter 11 bankruptcy filing.

Ciena Corp.’s convertibles traded down on an outright basis, but opened up a little bit on swap. The moves came as the underlying shares fell 17% after the Hanover, Md.-based telecom-equipment maker reported quarterly results that beat estimates but guided below consensus for its results for the current quarter and full year.

Ctrip.com International Ltd. was also in trade and about flat on a swap basis after news that Priceline Group Inc. is going to increase its stake in the China travel site, a New York-based trader said.

“The on-the-run stuff was trading roughly in line or down slightly,” the trader said.

New SunPower ‘up marginally’

SunPower’s new 4% convertibles due 2023 traded down to as low as 97.875 on Thursday along with lower shares after its debut. The bonds recovered somewhat with shares ending lower by 65 cents, or 2.8%, to $22.39.

They were “up marginally,” a trader said.

The fact that it is the end of the year and market players do not want to assume more risk was one reason put forward for the blasé showing. Also SunPower’s stock borrow – which is OK currently – could get worse and was seen as a strike against the deal.

“People are worried about SunPower’s borrow getting worse. It has been dicey in the past and people think that it is going to get worse,” a trader said.

As for the older issues, those didn’t trade overly actively, although there was an outright buyer of the 0.875% convertible paper.

Overall the deal and the market tone were described as apathetic. “People don’t really want to add more risk,” a trader said.

SunPower shares were down a lot before the market open but had pared losses for only a mild decline by mid-morning, a trader noted.

The issue has a $25 million greenshoe and was upsized from $350 million.

The convertibles were talked to yield 3.5% to 4% with an initial conversion premium of 32.5% to 37.5%, according to market sources.

The Rule 144A deal, which was launched after the market close on Tuesday, priced after the market close on Wednesday via joint bookrunners Goldman Sachs & Co., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc. and Mizuho Securities USA Inc.

The bonds will be stock settled only.

There is cash takeover protection via a conversion rate ratchet formula and dividend protection via a conversion rate adjustment.

Total Energies Nouvelles Activites USA, a subsidiary of Total SA, which owns about 57.5% of SunPower’s common stock, agreed to purchase $100 million of the convertibles. If the underwriters exercise the greenshoe, Total’s commitment will not change.

The company intends to use the proceeds for general corporate purposes.

SunPower is a San Jose, Calif.-based provider of high-efficiency solar cells, solar panels and solar systems.

Ciena expands slightly

Ciena’s 0.875% convertibles due 2017 fell nearly a point to 98.5, according to Trace data. The Ciena 3.75% convertibles due 2018 traded down 13.25 points to 123, and the Ciena 4% convertibles due 2020 traded at 129. Ciena shares were down 15% in the early going.

But on a swap basis, the bonds were said to have expanded slightly.

Ciena reported a fiscal fourth-quarter loss of $13.8 million, or 10 cents per share, compared to a loss of $30.7 million, or 29 cents, for the year-earlier quarter. Excluding items, the earnings were 42 cents per share, which beat estimates. Revenue was $692 million for its latest quarter ending in October, which beat estimates.

But for the current quarter the company sees revenue in a range of $555 million to $590 million, which was lower than the $636 million that analysts had been expecting. For the full year, the company sees revenue of $2.64 billion to $2.67 billion, which was below consensus for $2.77 billion.

Mentioned in this article:

Ciena Corp. Nasdaq: CIEN

Ctrip.com International Ltd. Nasdaq: CTRP

Harmonic Inc. Nasdaq: HLIT

SunEdison Inc. Nasdaq: SUNE

SunPower Inc. Nasdaq: SPWR

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