Tesla adds on upgrade; Chiquita edges up on takeover offer; Empire State down since issue

By Rebecca Melvin

New York, Aug. 11 – U.S. convertibles firmed up as calm returned to the financial markets on Monday, following last week’s pullback amid geopolitical tensions and uncertainty regarding where monetary policy is headed from here.

“Things are not sliding down. It’s not time to uncork the champagne, but with the market calmness, outrights have come back to repurchase some bonds, and things are firm,” a New York-based trader said.

Among issues that were firmer on Monday were Tesla Motors Inc.’s convertibles, which were trading up on the back of an upgrade on the Palo Alto, Calif.-based electric car maker, the trader said.

Deutsche Bank upgraded Tesla shares to “buy” from “hold” and lifted its price target to $310 per share from $220 per shares, citing strong growth prospects.

Company-specific news also drove some activity including Chiquita Brands International Inc.’s fresh takeover offer from Brazilian juice maker Cutrale Group and financial conglomerate Safra Group.

Chiquita’s out-of-the-money convertibles responded mildly to the news, stretching to 101 from around par while shares of the Charlotte, N.C.-based banana and produce distributor surged 30%.

Empire State Realty Trust Inc.’s $250 million of 2.625% exchangeable senior notes, which priced last week, were also trading Monday, as new parties stepped in amid a 1.25-point to 1.5-point price slide since issue.

Priceline Group Inc. was in focus but didn’t trade actively after the online travel company beat earnings estimates and reported revenue that was in line with expectations for its latest quarter. It guided current-quarter earnings below estimates, however.

Priceline’s 1% convertibles due 2018 showed up on Trace data at 149.75 early Monday, which was up a couple of points in tandem with shares that were up by 2.5% at $1,313.35.

The Priceline 0.35% convertibles due 2020 traded at 122.9, which was up 1.6 points, and the company also has a 1.25% convertible due 2015.

The Priceline bonds are “locked up pretty tight in strong, outright hands and they just don’t trade very much. I haven’t even put out a market in them,” a New York-based trader said.

In primary market action, Aegerion Pharmaceuticals Inc. launched a deal ahead of the market for same-day pricing. The $250 million of five-year convertible senior notes were talked at a 2% to 2.5% coupon and a 30% to 35% initial conversion premium.

After the market close, the new issue calendar grew by an additional three deals. Ligand Pharmaceuticals Inc. launched a deal for $225 million of five-year convertibles talked to yield 0.5% to 1% with an initial conversion premium of 32.5% to 37.5%; Apollo Commercial Real Estate Finance Inc. launched an offering of $100 million of 5.5% five-year convertible senior notes; and EnerNOC Inc. said it plans to price $130 million of five-year convertible senior notes.

Tesla adds on upgrade

Tesla’s 0.25% convertibles due 2019, or the A tranche, traded up to 100 on Monday and were seen last at 99.926, which was up about 2 points from Friday.

Tesla’s 1.25% convertibles due 2021, or the B tranche, changed hands last at 100 and were also up about 2 points.

Tesla’s 1.5% convertibles due 2018 didn’t trade actively but did change hands at 215.42, which was up from 210.5 on Friday.

Tesla shares rallied 4.5% to a record close of $263.74.

One trader said that “outside of Tesla,” trading on the firm’s convertibles desk was relatively quiet.

“It’s pretty slow going out there, but with fear out of people’s minds, things were better,” the trader said.

Chiquita’s takeover eyed

Chiquita’s 4.25% convertibles due 2016 were seen last at 100.5, which was up a little from just around par. Trading was as expected, however, and a bit more active than usual, a Connecticut-based trader said.

The $13.00 a share, all-cash offer by the newly formed affiliate of the Cutrale and Safra Groups, pulled Chiquita’s common stock up $3.04, or 30%, to $13.10.

“If we are able to proceed on a timely basis with due diligence and discussions, we will be in a position to close the transaction before the end of the year, within the same timeframe you have indicated for the Fyffes transaction,” Cutrale and Safra said in a letter to Chiquita’s management, a copy of which was included in the statement.

Empire lower from issue

Empire State’s 2.625% convertibles were quoted at 99.75 with the underlying share at $16.33 on Monday, which represents a decline from the date of issue of about 1.25 points to 1.5 points, a trader said.

Empire State shares ended the session up 22 cents, or 1.4%, to $16.29, and that is up from $15.88 at the close Aug. 6, when the deal closed.

A trader said that the deal, which priced last week via Goldman Sachs & Co., was not being supported by that underwriter, and the deal was down.

Aegerion to price

Aegerion launched an offering of $250 million of five-year convertible senior notes early Monday that it planned to price after the market close. The notes were talked at a 2% to 2.5% coupon and a 30% to 35% initial conversion premium, according to a market source.

The Rule 144A offering has a $37.5 million greenshoe and was being sold via bookrunners Jefferies & Co. and J.P. Morgan Securities LLC.

The notes are non-callable and will be settled in shares. They have dividend and takeover protection.

In connection with the offering, Aegerion plans to enter into privately negotiated convertible note hedge and warrant transactions with one or more of the initial purchasers of the notes.

Proceeds will be used for working capital and other general corporate purposes, including funding possible acquisitions or investments, and to repurchase up to $35 million of outstanding common stock from certain purchasers of the notes.

Cambridge, Mass.-based Aegerion is a biopharmaceutical company that develops therapies for rare diseases.

Ligand to price

Ligand’s planned $225 million of five-year convertibles were talked to yield 0.5% to 1% with an initial conversion premium of 32.5% to 37.5%.

The Rule 144A offering has a $20 million greenshoe and was being sold via joint bookrunners BofA Merrill Lynch and Deutsche Bank Securities Inc.

The company has also authorized a $200 million share repurchase program over the next 12 months.

Proceeds of the bond issue will be used to repurchase up to $45 million of shares of common stock concurrently with the bond offering, with remaining proceeds for additional share repurchases of up to a total of $200 million. Proceeds will also be used to fund the net cost of a call spread, or convertible note hedge and warrant transactions that are also planned in connection with the deal.

The notes are non-callable with no puts.

San Diego, Calif.-based Ligand is a biopharmaceutical company.

Apollo to price add-on

Apollo Commercial plans to price an additional $100 million of bonds to its 5.5% convertibles initially priced in March. The new bonds will be offered to investors at a purchase price of 102 to 103, but all other terms will be identical to the original issue.

There is a $15 million greenshoe for the offering, which was being sold via joint bookrunners JPMorgan, BofA Merrill Lynch and Citigroup Global Markets Inc.

The notes are non-callable with no puts.

Proceeds will be used to repay amounts outstanding under the company’s repurchase facility with JPMorgan Chase Bank NA, and, to the extent not used therefor, to acquire the company’s target assets, which include commercial first mortgage loans, subordinate financings, commercial mortgage-backed securities and other commercial real estate-related debt investments, and for general corporate purposes.

Apollo is a New York-based real estate investment trust that primarily originates, invests in, acquires and manages performing commercial real estate-related debt instruments.

EnerNOC to price

EnerNOC, a Boston-based provider of cloud-based energy efficiency software, plans to price $130 million of five-year convertible senior notes in a Rule 144A deal.

There is a $20 million greenshoe for the deal being sold via Morgan Stanley.

The company plans to use about $30 million of the proceeds to repurchase shares concurrently with the closing of the notes offering. Remaining proceeds will be used for general corporate purposes, which may include expansion of its current business through acquisitions of, or investments in, other businesses and products.

Mentioned in this article:

Aegerion Pharmaceuticals Inc. Nasdaq: AEGR

Apollo Commercial Real Estate Finance Inc. NYSE: ARI

Chiquita Brands International Inc. NYSE: CQB

Empire State Realty Trust Inc. Nasdaq: ESRT

EnerNOC Inc. Nasdaq: ENOC

Ligand Pharmaceuticals Inc. Nasdaq: LGND

Priceline Group Inc. Nasdaq: PCLN

Tesla Motors Inc. Nasdaq: TSLA

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