Suntech adds on production cut; SunPower higher; Alpha Natural up; Hovnanian, Ctrip on tap

By Rebecca Melvin

New York, Sept. 18 - Some convertible bonds saw pricing action along with moves in the underlying shares of those issues on company-specific headlines Tuesday, but many issues stood pat despite share moves, market players said.

Distressed Suntech Power Holdings Co. Ltd.'s convertibles were one of the movers. That paper was active and traded up a couple of points to 33 after the world's largest solar power maker, based in Wuxi, China, said Monday it is temporarily cutting capacity by about 25% due to oversupply problems and amid preliminary antidumping tariffs in the United States.

San Jose, Calif.-based solar power company SunPower Corp. also traded up on Tuesday.

The convertibles of Alpha Natural Resources Inc. extended a recent rebound after the Abingdon, Va.-based coal producer said it is cutting about 1,200 jobs, or 9% of its work force, due to sapped demand for its thermal coal output.

Clearwire Corp. was quiet despite a slide in the underlying shares of the Bellevue, Wash.-based broadband services company after Time Warner Cable announced it would be selling its stake in the company.

DFC Global Corp. and Cash America International Inc. were also quiet as the underlying shares fell after Jefferies & Co. downgraded the shares on new regulations in the U.K. that could curtail the U.S. companies' collections operations there.

Gilead Sciences Inc. was also very active again as shares of the Foster City, Calif.-based biopharmaceutical company extended gains.

After the market close, two new deals were launched, including a $140 million offering of five-year convertible senior notes by foreign-based issuer Ctrip.com International Ltd., which has American Depositary Shares. That deal was talked to yield 0% to 1% with a 10% to 15% initial conversion premium and was seen pricing ahead of the market open on Wednesday.

Also launching after the market close Tuesday was a $90 million offering of exchangeable note units being priced by K. Hovnanian Enterprises Inc., a subsidiary of Hovnanian Enterprises Inc., which were talked to yield 5.5% to 6% with a 35% to 40% initial conversion premium and were expected to price after the market close Wednesday.

Solar names in play

Suntech Power Holdings' 3% convertible notes due 2013 added in active trade to 33, from a previous level of about 30 bid, 31 offered, a Connecticut-based trader said.

The ADS of the world's largest solar-panel maker edged slightly higher after gains notched Monday, to close up about 1% to $0.936.

The situation with Suntech is "very distressed," a New York-based trader said, "so it's going to be gap-y."

He said the gap up - of about 4 or 5 points from Sept. 10 - was due to the announcement Monday that the company is reducing production to cut costs.

The company said it will cut production capacity for solar cells to 1.8 gigawatts from 2.4 gigawatts of annual capacity, or about 25% of output, and about 1,500 employees will be affected.

Meanwhile, rival SunPower saw its 4.75% convertibles due 2014 in trade higher on Tuesday at 95.25. Later, the issue was quoted 94.75 bid, 95.25 offered, and it looked to be up a point or more from last week, a New York-based trader said.

SunPower shares ended higher by 3 cents at $4.78, but the shares had been trading as high as $4.92 during the session.

Alpha Natural adds

Alpha Natural's 3.25% convertibles due 2015 traded at 91 bid, 91.5 offered on Tuesday, which was up about a point from last week when they were around 90.

Alpha Natural's 2.375% convertibles, which typically trail the 3.25% issue by 3 or 4 points, was quoted at 87.5 bid, 88 offered.

Shares of the Abingdon, Va.-based coal producer started higher but closed down 20 cents, or 2.5%, to $7.88.

The company is closing mines in Virginia, West Virginia and Pennsylvania in its shift away from thermal coal to focus on metallurgical, or steelmaking, coal and cutting 1,200 jobs, or 9% of its workforce.

In June, Alpha said it would stop production at four mines in Kentucky, reduce thermal coal production and cut 150 jobs.

DFC, Cash America quiet

DFC Global's 3.25% convertibles due 2017, of which $230 million were priced in April, were seen around 109 versus an underlying share price of $17.72 on Tuesday, although the issue wasn't seen to have traded.

A second source quoted the paper higher at 111 to 112 bid versus an underlying share price of $18.25.

Shares of the Berwyn, Pa.-based provider of financial services to unbanked and under-banked consumers ended down $1.61, or 8.3%, at $17.75.

DFC has a network of stores providing check cashing, loans and pawnbroking services in the United States, Canada, the United Kingdom and Ireland.

Cash America's 5.25% convertibles due 2029, or which $115 million of notes were priced in May 2009, were seen around 162.5 versus an underlying share price of $38.79.

Shares of the Fort Worth, Texas-based pawnshop owner and operator ended down $1.57, or 3.9%, at $38.72.

Jefferies cut both shares to "hold" from "buy" and also cut price targets and 2013 earnings estimates for both companies, citing regulations being adopted in the U.K. that will tighten restrictions on payday lenders' collections from delinquent borrowers.

Ctrip.com to price

Ctrip.com launched an offering of $140 million of five-year convertible senior notes that were talked to yield 0% to 1% with a 10% to 15% initial conversion premium, according to a market source.

The Shanghai-based provider of travel services said a portion of the proceeds will be used to purchase a certain amount of ADSs from purchasers of notes in privately negotiated transactions, and to purchase additional ADSs from time to time, and to pay costs associated with a convertible note hedge transaction.

Remaining proceeds will be for general corporate purposes, including working capital needs and potential acquisitions of complementary businesses.

The notes are being distributed under Rule 144A in the United States and to certain persons offshore under Regulation S.

The notes will be convertible into Ctrip's American Depositary Shares and were expected to price ahead of the market open on Wednesday.

There is a $20 million greenshoe for the deal, which is being sold via J.P. Morgan Securities LLC.

The notes are non-callable for life, but holders can put the bonds on Sept. 15, 2015.

Hovnanian to price

K. Hovnanian Enterprises Inc., a subsidiary of Hovnanian Enterprises Inc., launched an offering of $90 million of five-year exchangeable note units to yield 5.5% to 6% with a 35% to 40% initial conversion premium, according to a market source.

Concurrently with the offering, the Red Bank, N.J.-based homebuilder plans to issue up to $550 million of senior secured first-lien notes due 2020 and $247 million of senior secured second-lien notes due 2020 in a private placement.

The exchangeable notes are contingent on the secured notes offering.

The exchangeable notes are non-callable with no puts.

The registered notes were being sold via bookrunners Credit Suisse Securities, Citigroup Global Markets Inc. and JPMorgan.

Proceeds from the units offering and the notes offering are earmarked to fund a tender offer and consent solicitation for any and all of its outstanding 10.625% senior secured notes due 2016.

Mentioned in this article:

Alpha Natural Resources Inc. NYSE: ANR

Cash America International Inc. NYSE: CSH

Clearwire Corp. Nasdaq: CLWR

Ctrip.com International Ltd. NYSE: ADS: CTRP

DFC Global Corp . Nasdaq: DLLR

Gilead Sciences Inc. Nasdaq: GILD

Hovnanian Enterprises Inc. NYSE: HOV

SunPower Corp. Nasdaq: SPWR

Suntech Power Holdings Co. NYSE: STP

© 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.