Cobalt drops outright, comes in on hedge; B2Gold to price $225 million; Spansion on tap

By Rebecca Melvin

New York, Aug. 19 - Cobalt International Energy Inc.'s convertibles slumped in trade on Monday - shedding about 9.5 points on an outright basis and coming in about 0.75 point on swap - after the Houston-based oil company said that it didn't find commercially viable oil in one of its wells in the Gulf of Mexico. Shares plunged 15%.

The Cobalt convertible's performance was "kind of disappointing," a New York-based trader said. "The last time [Cobalt] stock came off a pretty good amount, outright buyers stepped in to support the convertible, so it actually expanded. But that is not the case today, at least not yet."

Elsewhere, the secondary market was quiet, market players said. They said the next two weeks were expected to be extremely slow as August and summer vacation schedules play out.

JDS Uniphase Corp.'s $575 million of 0.625% convertible notes, which debuted in the market Friday, were not heard in trade on Monday.

The Rambus Inc. $120 million of 1.125% convertibles, which also debuted last week, were quiet as well.

But the primary market saw two new offerings. Canadian-based B2Gold Corp. launched $225 million of five-year convertible notes ahead of the market open that was seen pricing after the market close.

The gold producer's deal was being sold via joint bookrunners J.P. Morgan Securities LLC and BMO Capital Markets and was being distributed in the United States, Canada and globally under Rule 144A.

Late in the day, Spansion Inc. subsidiary Spansion LLC launched an offering of $125 million of seven-year exchangeable notes that were seen pricing Tuesday after the market close.

B2Gold's deal was talked at a 3% to 3.5% coupon and 35% to 40% premium, and the Spansion deal was talked at a 1.75% to 2.25% coupon and a 27.5% to 32.5% premium.

Cobalt comes 'in' on swap

Cobalt's 2.625% convertibles due 2019 traded down to 104 bid, 104.5 offered versus an underlying share price of $25.00. That was down from 113.5 bid, 114 offered versus an underlying share price of $29.37 coming into the day.

The bond dropped about 9.5 points outright. On a delta of about 70%, they came in about 0.75 point, a trader said.

Shares of the oil exploration and development company plunged $4.47, or 15%, to $24.90 in active trade.

The company said its Ardennes #1 exploratory well reached a depth of 6,552 feet and found reservoir sands, but no commercial hydrocarbons. Cobalt owns 42% working interest in Ardennes.

B2Gold to price $225 million

Vancouver, B.C.-based B2Gold, which explores and develops mineral properties primarily in Colombia, Nicaragua and Uruguay, launched a U.S. dollar-denominated convertible deal that was being distributed globally, a syndicate source said.

B2Gold shares fell 44 cents, or 13%, to $2.86.

The convertible deal didn't appear to be getting a lot of market focus, but that could have been due to the timing of the launch on a Monday. And valuing the deal for those that took a look at it wasn't an easy task.

"It's a little tricky because there aren't any listed options, which makes it kind of hard to compare anything, volatility wise or to hedge yourself. So it may be more like an outright deal," a New York-based trader said.

The gold sector has been very volatile recently, he said.

There was no gray market in the paper.

Price talk was for a 3% to 3.5% coupon and a 35% to 40% initial conversion premium.

The Rule 144A offering has an over-allotment option for up to $33.75 million of additional notes.

Joint bookrunners are JPMorgan and BMO Capital. Co-managers include TD Securities, GMP Securities, Canaccord and National Bank Financial.

Proceeds are earmarked for general corporate purposes.

Spansion to price

Sunnyvale, Calif.-based Spansion, a semiconductor device company, launched a deal after the market close for pricing Tuesday.

"It's not a bad time really, with one-day marketing, people will be back and focused on it for tomorrow," a market source said.

The Rule 144A offering has an option for up to an additional $18.75 million of notes and was being sold via joint bookrunners Citigroup Global Markets Inc., Barclays, Morgan Stanley & Co. LLC, Jefferies & Co. and Wells Fargo Securities LLC.

In connection with the pricing, Spansion plans to enter into capped call transactions with one or more of the initial purchasers of the bonds or their affiliates.

Proceeds will be used to pay the cost of the capped call transactions, to repurchase $100 million principal amount of its outstanding 7.785% senior notes due 2017 and to fund capital expenditures, working capital and general corporate purposes, which may include repayment of other outstanding debt and to fund acquisitions or other strategic transactions.

Mentioned in this article:

B2Gold Corp. NYSE: BTG

Cobalt International Energy Inc. NYSE: CIE

JDS Uniphase Corp. Nasdaq: JDSU

Rambus Inc. Nasdaq: RMBS

Spansion Inc. Nasdaq: CODE

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