Navistar bid 99.75 in gray; old Navistars mixed; YY seems cheap; Emerald sees issue bid

By Rebecca Melvin

New York, March 18 - There were four deals in the convertibles market Tuesday with pricing pegged for after the market close. Two more deals launched after the market close for a total consideration of $1.3 billion in convertible debt in six base deals.

Navistar International Corp.'s planned $350 million of five-year convertible senior notes were seen in the gray market ahead of final terms being fixed at 99.75 bid, 100.75 offered.

On the back of the new Navistar deal, the existing Navistar convertibles traded mixed, market players said.

The existing Navistar 4.5% convertibles were called lower on a dollar-neutral, or hedged, basis by 0.5 point to a point at an outright price of 99.5 bid, 100.5 offered.

The existing Navistar 3% convertibles due October 2014, which are very short-dated and being repurchased in part with proceeds of the new deal, were higher at 101.125 to 101.375 at the close, which was called better by 0.5 point to 0.625 point on a hedged basis.

Navistar shares ended lower by 53 cents, or 1.5%, at $34.33.

YY Inc.'s planned $400 million offering of five-year convertible senior notes was offered at 101, no bid during the session ahead of final terms being fixed.

The Emerald Oil Inc. deal for $125 million five-year convertible senior notes saw a small, issue bid but no offers.

Gramercy Property Trust Inc.'s $100 million of five-year senior notes was not heard in the gray market ahead of final terms. The deal for the commercial real estate investment company was talked at a 3.5% to 4% coupon and a 17.5% to 22.5% initial conversion premium.

Back in established issues, Tesla Motors Inc. was trading pretty actively and in line with the underlying shares, which were higher by $6.00, or 2.6%, on the day.

"I didn't see a lot of stuff selling except maybe the Navistar 4.5% [convertibles]," a New York-based trader said of the secondary market.

After the market close, Vector Group Ltd. launched an offering of $150 million of six-year convertibles that was seen pricing ahead of the market open on Wednesday and National Health Investors Inc. launched an offering of $175 million of seven-year convertibles that was seen pricing after the market close on Wednesday.

Planned Navistar bid 99.75

Navistar's planned $350 million of five-year convertible senior notes were seen in the gray market ahead of pricing "wrapped right around par," a trader said, or at 99.75 bid, 100.75 offered.

Using a credit spread of 725 bps over Libor, a 35% vol. and 0.75% borrow cost, the deal looked to be rich at 99.20 at the midpoint of talk, a Connecticut-based trader said.

The deal was talked at a high 4.25% to 4.75% coupon and a high 57.5% to 62.5% premium, which is not a typical profile for a new convertible issue.

"Four-and-a-halves, up 60% is an unusual profile, but it's similar to the one they brought last time," a New York-based trader said, referring to the new deal's terms and the Navistar 4.5% convertibles due 2018, which priced in October at a discount to par of 99.5 and with a 60% initial conversion premium.

The new deal looked to be geared toward outright investors, market players said.

The terms would appeal to an outright investor given the high coupon, and the terms would not appeal to hedged investors given the a 60% initial conversion premium since it would mean a lower delta and would be difficult to hedge for the downside.

"It appeals to the outright, credit shops," a trader said.

Proceeds of the new deal will be used to buy back Navistar's existing 3% convertibles, which mature later this year.

Planned YY offered at 101

YY's planned $400 million deal was not bid in the gray market, which meant that the 101 offer was not really reliable as an indicative level.

One Connecticut-based trader valued the deal of the Guangzhou, China-based social media company up at 103 at the midpoint of talk, using a credit spread of 700 bps over Libor, a 40% vol. and a 1% stock borrow.

Pricing of the new YY offering was talked at a 1.75% to 2.25% coupon and a 35% to 40% initial conversion premium.

The Rule 144A and Regulation S deal has a $60 million greenshoe and was being sold via bookrunners Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co International plc.

Proceeds will be used for general corporate purposes, including working capital and potential acquisitions of complementary businesses.

YY is an online music, entertainment and gaming company.

Planned Emerald Oil issue bid

Emerald Oil saw an issue bid, but it wasn't expected to trade before Wednesday; although sources suggested that the deal for the oil and gas company was likely to go well.

Using a credit spread of 650 bps over Libor and a 35% vol. got the paper slightly rich at 99.6 at the midpoint of talk, according to one trader.

It was seen slightly rich using a credit spread of 650 bps over Libor and 35% vol., according to one trader, but with a 45% vol., the deal was seen fair value.

Emerald Oil planned to price $125 million five-year convertible senior notes to yield 1.75% to 2.25% with a 32.5% to 37.5% initial conversion premium.

The Rule 144A offering has a greenshoe for up to an additional $18.75 million of notes and was being sold via Credit Suisse Securities (USA) LLC and Barclays as joint book-running managers.

Proceeds will be used to repay all of the outstanding borrowings under a revolving credit facility and for general corporate purposes, including funding a portion of the company's drilling and development program and potential acquisitions.

Vector Group to price

Vector Group, the Miami-based tobacco holding company, planned to price $150 million of six-year variable interest rate convertible bonds before the market open Wednesday that were talked to yield initially 1.5% to 2% with a conversion premium of 22.5% to 27.5%, according to a market source.

The overnight, registered deal was being sold by bookrunner Jefferies LLC, and it has a $22.5 million over-allotment option.

Proceeds are earmarked for general corporate purposes, including its existing tobacco business and in additional investments in real estate through its subsidiary New Valley LLC. A portion of proceeds may also be used for upcoming debt maturities.

National Health to price

Murfreesboro, Tenn.-based National Health Investors, a health care real estate investment trust, planned to price $175 million of seven-year convertibles at a 3.25% to 3.75% coupon and a 17.5% to 22.5% initial conversion premium.

The registered, off-the-shelf offering has a $25 million greenshoe and was being marketed by joint bookrunners BofA Merrill Lynch and J.P. Morgan Securities LLC.

The notes are non-callable for life with no puts. There is a change-of-control make-whole delivered upon conversion as additional shares. The bonds also have dividend protection.

Conversion settlement will be in cash, shares or a combination of cash and shares.

Proceeds are expected to be used to reduce amounts outstanding under its revolver and for general working capital purposes.

Mentioned in this article:

Emerald Oil Inc. NYSE: EOX

Gramercy Property Trust Inc. NYSE: GPT

National Health Investors Inc. NYSE: NHI

Navistar International Corp. NYSE: NAV

Tesla Motors Inc. Nasdaq: TSLA

Vector Group Ltd . NYSE: VGR

YY Inc. NYSE: YY

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