Swift edges over par on debut; Prospect Capital bags overnight deal; Omnicare trades lower

By Rebecca Melvin

New York, Dec. 16 - Swift Transportation Co.'s newly priced 6% mandatory convertibles traded right around par and closed slightly higher on Thursday as the underlying shares recouped losses from an early slide.

Prospect Capital Corp. paper was new in the market also after the New York venture capital and private equity firm priced a $150 million overnight offering of 6.25% convertible senior notes. The new paper wasn't heard in the market, and it wasn't possible to get the closing mark from its bookrunner.

Back in the secondary market, Omnicare Inc.'s 3.25% convertibles due 2035 were not very active but traded between 91 and 92 after the Covington, Ky.-based provider of geriatric pharmaceuticals announced it had successfully tendered $748.23 million principal amount of the bonds for $525 million, leaving $452.5 million of the issue outstanding.

"The question is what will they do with the balance," a New York-based sellside trader said regarding the company's intentions toward the remaining bonds outstanding.

Meanwhile, Clearwire Corp.'s recently priced 8.25% convertibles traded at 101.25 versus a share price of $5.35, which compared to 100.5 versus a share price of $5.40 on Wednesday, according to a New York-based sellside desk analyst.

NII Holdings Inc.'s 3.125% convertibles were also in trade and up 0.25 point at 98 compared to a previous level of 97.5, according to a West Coast-based sellside trader.

Overall, the convertibles market was called "directionless," and volumes were tepid, sources said.

"Most people are either recovering from holiday parties or headed to them tonight," one trader said.

Swift edges up

Swift's 6% mandatory convertibles were seen at 10.95 bid, 11.05 offered during the session after the Phoenix-based trucking company priced an offering of $250 million concurrently with an initial public offering of common shares, one of nine IPOs planned this week.

At the close, one syndicate member marked the new mandatories at 11.05 bid, 11.25 offered, versus a share price of $11.10.

The common stock offering was issued at $11.00.

"It was priced right," the syndicate source said.

Those shares opened at their $11.00 issue price but promptly sold off to as low as $10.61 before regaining that ground.

The Rule 144A mandatories were initially going to be $300 million in size, and pricing was delayed due to the "mix of securities that were concurrently going on, which slowed the process down," a New York-based syndicate source said.

The trust structure of the mandatories was behind the paper's unconventional par price of $11 each, the source said.

Pricing came at the tight end of talk, which was for a yield of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%.

The three-year mandatories have a $37.5 million greenshoe and were sold via joint bookrunners Morgan Stanley & Co. Inc., Bank of America Merrill Lynch, Wells Fargo Securities., UBS Investment Bank and Deutsche Bank Securities Inc.

Prospect Capital prices

Prospect Capital priced an overnight offering of $150 million senior notes with a 6.25% coupon and a 10% initial conversion premium.

The deal was mostly played by outright players owing primarily to the company's fat 12% stock dividend, which would have made the borrow carry for hedged players too expensive.

Players were those interested in the high yield of a BBB-rated company, a syndicate source said, adding that those players were outrights.

The notes will be convertible into shares of Prospect's common stock based at an initial conversion price of $11.35 per share.

Proceeds will be used to repay debt under its credit facility, invest in high-quality short-term debt instruments or a combination thereof, and thereafter to make long-term investments in accordance with Prospect's investment objectives.

It was interesting that both of the new issues, including Swift and Prospect Capital, had higher 6% yields. But that was not deemed to be significant by market players.

"Swift is a one off, a mandatory attached to an IPO, and it sounds like it was tough to get done. Prospect needed the coupon to make up for the underlying common's 11.70% yield," a West Coast-based sellside trader said.

Omnicare lower than tender

Omnicare's 3.25% convertibles due 2035 traded in the 91 to 92 range, which was below the 95 tender price that was garnered by the company for fully half of the issue outstanding.

Omnicare paid $950 for each $1,000 bond tendered, which was deemed about right given that the paper still have five years left before it could be called or put.

Following the tender, $452.5 million of the issue remains outstanding.

The smaller piece is left outstanding, and the question about what the company does with that balance was a focus of traders.

"I would have thought they would have traded better," one New York-based sellside trader said.

A second New York-based sellside trader noted that the paper doesn't usually trade every day, so perhaps Thursday's action wasn't indicative of the tender's result.

Mentioned in this article:

Clearwire Corp. Nasdaq: CLWR

NII Holdings Inc. Nasdaq: NIHD

Omnicare Inc. NYSE: OCR

Prospect Capital Corp. Nasdaq: PSEC

Swift Transportation Co. Nasdaq: SWFT

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