Investors keen on MolyCorp's new issue; Suntech paper sinks on CEO exit; AuRico sparkles

By Stephanie N. Rotondo

Phoenix, Aug. 17 - Convertible bond investors were focused on MolyCorp Inc. Friday as the company priced a $360 million new issue.

"It was all over the place," a trader said of the new 6% notes. But after rising in the previous session on word of the planned deal, MolyCorp's older convertibles were sinking in Friday trading.

Meanwhile, Suntech Power Holdings Co. Ltd. was on the decline, just one day after the company said its founder will step down as chief executive officer.

On the upside were AuRico Gold Inc.'s Northgate Minerals-linked convertible bonds. The company reported earnings earlier in the week.

MolyCorp the nom du jour

A trader said that MolyCorp was the big focus in the convertible debt market Friday.

"Outside of MolyCorp there was nothing," he said.

The Greenwood Village, Colo.-based rare earth metals exploration company priced a $360 million issue of five-year senior convertible notes at par to yield 6% with an initial conversion premium of 20%.

There is a $54 million greenshoe.

The trader said the issue was trading "all over the place.

"A lot of the trades were at par," he said. But as the stock weakened, so did the bonds, hitting lows with a 98 handle.

The stock dropped $1.32, or 11.83%, to $9.84, well below the $12.00 per share conversion premium.

The new issue didn't do much to help the company's older issue either.

The 3.25% convertible notes due 2016 had risen in the previous session but came off of the highs on Friday to end at 64.125 bid, 64.375 offered. A trader said the bonds were around 65 bid, 66 offered earlier in Friday's session, still down from Thursday's close around 70.

"They should not have gone up in the first place," he said. "They should have been selling all along. If it was going to be a positive credit event, those bonds should have held."

Instead, he opined, investors were thinking that they would "rather own [the new issue] because they mature sooner," he said.

The initial conversion rate is 83.3333 shares per each $1,000 of notes, equal to an initial conversion price of $12.00 per share.

The note offering is taking place concurrently with a $138 million common stock sale.

Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC are the joint bookrunners.

Proceeds will be used to fund operating expenses, working capital, capital expenditures and any other cash requirements through the first half of 2013. This includes certain cash payments on debt coming due in August due to an exercise of buyout and conversion rights triggered via a change of control.

Suntech paper dips

Suntech Power Holdings' 3% convertible notes due 2013 dropped to 43.5 bid, 44.5 offered from previous round lots in a 47.5 to 48 context, a trader said.

The stock fell 3 cents, or 2.97%, to 98 cents on Friday.

The losses came as the China-based company announced its founder, Zhengrong Shi, was stepping down as CEO.

Chief financial officer David King will take his place.

King was hired in May 2011. Shi will continue to act as executive chairman and chief strategy officer.

The news took some market watchers by surprise.

"This is an odd move at an odd time for Dr. Shi, who is unloved by investors but [who] has been the poster child for [the] Chinese solar [industry]," wrote CLSA analyst Charles Yonts in a report to clients.

Suntech is currently facing many hurdles as it attempts to overcome anti-dumping charges in the United States and Europe. In the United States, companies that have been dumping Chinese solar panels into the market have been slapped with anti-dumping tariffs.

Additionally, the company said last month that it might have fallen victim to fraud regarding a $688 million German government bond-financing deal with GSF Capital Pte. Ltd.

AuRico shines

AuRico's Northgate Minerals Corp.-linked 3.5% convertible bonds due 2016 "have definitely gotten better," a trader reported Friday.

He quoted the issue at 101 bid, 101.625 offered, up about a point outright.

The stock closed up 14 cents, or 2.17%, to $6.60 on Friday.

"It's not the biggest issue in the world," the trader noted, adding that the slightest uptick in demand could result in this kind of a move.

On Monday, the Toronto-based gold mining company reported its second-quarter results, showing revenues of $113.7 million.

Mentioned in this article:

MolyCorp Inc. NYSE: MCP

Suntech Power Holdings Co. Ltd. NYSE: STP

AuRico Gold Inc. NYSE: AUQ

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.