Verint flat to richer dollar neutral; Exelon flat dollar neutral since issue; Finisar off

By Rebecca Melvin

New York, June 13 – Verint Systems Inc.’s newly priced 1.5% convertibles added on an outright basis, but were flat or just slightly higher on a dollar-neutral basis after their debut in the secondary market on Friday. The Melville, N.Y.-based security and surveillance business priced an upsized $350 million of the notes through the rich end of coupon talk and at the rich end of premium talk late Thursday.

The new Verint convertibles due 2021 were seen at 102 bid, 102.75 offered at the end of the session with the underlying shares up 94 cents, or nearly 2%, at $49.22, a syndicate source said.

Verint was very actively traded on Friday, but Exelon Corp.’s 6.5% equity units, which debuted in the convertibles market on Thursday, also continued to see some action. The $50-par Exelon convertibles were up another point on an outright basis to about $53 at the close, but on a dollar-neutral basis, they are flat, or around par, since issue.

Elsewhere there was a little bit of the Colony Financial Inc. 3.875% convertibles in trade, and they printed up about 0.75 point to 102 in a move that was in tandem with shares of the Santa Monica, Calif.-based real estate investment and finance company, which were up 2%. Colony priced a $150 million add-on to the 3.875% convertibles this week, raising the deal size to $380 million.

Finisar Corp., the Sunnyvale, Calif.-based fiber-optic equipment maker, swooned after posting a weak outlook for the current quarter, with profit well below expectations amid higher capital expenditures in China.

Finisar shares fell 22%, and the convertibles also tanked, at least on an outright basis, to about par from 112.5 bid, 113 offered previously.

The convertibles market saw in excess of $2.5 billion in new issuance this week, which was on top of $2.5 billion of new issuance in the previous week. The abundance of new paper sent the secondary market down slightly, and the most recent deals haven’t performed spectacularly in the aftermarket, including j2 Global Inc.’s newly priced 3.25% convertibles due 2029, Ariad Pharmaceuticals Inc.’s newly priced 3.625% convertibles due 2019 and TCP Capital Corp.’s new 5.25% convertibles due 2019.

The amount of new paper has caused the first weakening in the secondary market in some time, and while pricing of new deals has continued to be strong to date, the effect of weakness in the secondary will be seen in the primary, a syndicate source said.

Verint slightly richer

Verint’s new 1.5% convertibles due 2021 traded up to about 102 bid, 102.75 offered with the underlying shares up nearly 2% to $49.22.

On a dollar-neutral basis the new paper was close to par or slightly richer by about 0.3 point.

Earlier Friday, the notes were trading around 101.75 with the shares up about 20 cents, or 0.4%, at $48.48.

It was “well received by the outright community and trading well,” a syndicate source said.

The new issue traded initially out of the chute when released for secondary dealings at 101, the source said.

The new paper broke at 101 and was trading well, according to a syndicate source.

The Verint deal came together with a secondary offering of common stock, which priced at a discount to the market close Thursday, and also with a call spread.

The secondary offering’s price discount wasn’t thought to have been a factor in the deal’s performance, a syndicate source said.

Verint also priced 5 million shares of common stock at $47.75 per share.

Verint priced an upsized $350 million of seven-year convertibles late Thursday at par to yield 1.5% with an initial conversion premium of 35%.

The registered, off-the-shelf deal was initially talked at $300 million in size. Pricing came through the rich end of coupon talk, which was 1.75% to 2.25%, and at the rich end of 30% to 35% premium talk.

The notes deal has a $50 million greenshoe, which was upsized from $45 million. Joint bookrunners were Deutsche Bank Securities Inc., Goldman Sachs & Co., Credit Suisse Securities (USA) LLC, RBC Capital Markets LLC, Barclays, 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, and they have takeover protection.

In connection with the notes offering, Verint entered into convertible note hedge and warrant transactions, or a call spread. The strike on the warrants is $75.00 per share, which boosts the initial conversion premium to 57% from the issuer’s perspective.

Proceeds of both the notes and stock offerings will be used to repay amounts outstanding under the company’s existing credit facility. Proceeds will also be used to fund the net cost of the call spread.

Exelon flat since issue

Exelon’s 6.5% equity units, of which $1 billion debuted on Thursday, edged up another point on an outright basis to $53 on Friday, but that move was against a 65 cent, or 1.9%, gain in the underlying shares to $35.72.

The dollar-neutral, or hedged, performance, was about flat.

The deal was considered one of the week’s best given its size and the fact that it is an investment-grade security.

On Thursday the new Exelon paper was seen at 51.25 to 51.5 at the close with the underlying shares of the Chicago-based utility down about 2%, market sources said.

The bonds priced at a $35.00 share price, which was where a secondary offering of stock came at a discount to the closing market price of $37.75.

Mentioned in this article:

Ariad Pharmaceuticals Inc. Nasdaq: ARIA

Colony Financial Inc. Nasdaq: CLNY

Exelon Corp. NYSE: EXC

Finisar Corp. Nasdaq: FNSR

J2 Global Inc. Nasdaq: JCOM

TCP Capital Corp. Nasdaq: TCPC

Verint Systems Inc. Nasdaq: VRNT

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