New B2Gold trades well on debut; upsized Spansion prices at the mids; Navistar paper adds

By Rebecca Melvin

New York, Aug. 20 - B2Gold Corp.'s newly priced 3.25% convertibles traded up nicely in the secondary market on Tuesday after the Vancouver, B.C.-based gold producer priced $225 million of five-year convertible senior notes at the midpoint of talk, a syndicate source said.

The new B2Gold convertible "traded up a couple of points on a 65% to 70% delta," the source said, quoting the paper at 103 bid, 104 offered versus an underlying share price of $2.93.

Also in the primary space, Spansion Inc.'s $125 million convertible offering was a market focus ahead of final terms seen being fixed after the market close. The Spansion deal was looking fair to rich at the midpoint of price talk, several sources said. But the deal did in fact come at the midpoint of talk for a 2% coupon and a 30% premium.

The deal was upsized to $150 million from $125 million amid high demand, a syndicate source said.

Elsewhere, Navistar International Corp.'s 3% convertible due 2014 was higher by about 0.375 point in good two-way flow, a New York-based convertibles analyst said about that bond's trading action. The underlying shares were up nearly 3% during the session.

Sterlite Industries (India) Ltd.'s 4% convertibles due 2014 traded up a little from Monday's level, but they were within the context of the bond's previous markets, a New York-based trader said, quoting the notes in trade earlier Tuesday at 97.5.

The Sterlite notes had traded down to 97 on Monday but had been 97.75 prior to Monday. Sterlite shares on the New York Stock Exchange jumped nearly 9%.

Sterlite is a large diversified metals and mining company in India.

Gold has been something of a market focus so far this week. In addition to the new B2Gold issue trading well, Goldcorp Inc. was atop the trading list on Tuesday and on Monday Royal Gold Inc.'s convertible was in trade.

"It appears to be making a bottom," a New York-based trader said of gold. "After a big move like that people are taking sides."

Overall, volume was light with one trader calling trading action sluggish.

New B2Gold trades well

B2Gold's newly priced 3.25% convertibles due 2018 traded up on their debut Tuesday to 103 bid, 104 offered versus an underlying share price of $2.93, according to a syndicate source.

The deal was trading well, and early action was described as "grinding higher," the source said.

B2Gold shares helped support the deal early on and then pushed higher in afternoon trading to end up 14 cents, or 4.7%, to $2.995 in heavy volume. B2Gold shares had dropped 13% on Monday after the deal was launched.

The Rule 144A deal was U.S. dollar denominated by a Canadian company.

One trader liked the B2Gold deal because it's a company with a $2 billion market capitalization and only a $225 million deal, so it's credit profile was not negatively affected.

The deal was well oversubscribed with both Canadian and U.S. investors participating; but the bias was heavily toward the United States, a syndicate source said. Allocations were to a blend of multi strategy and outright investors, he said.

The company's deal came at the midpoint of talk, which was for a 3% to 3.5% coupon and 35% to 40% premium.

There is an over-allotment option for up to $33.75 million of additional notes. Joint bookrunners were J.P. Morgan Securities LLC and BMO Capital Markets Corp. Co-managers included TD Securities, GMP Securities, Canaccord and National Bank Financial.

The notes are non-callable for three years and then provisionally callable at a share price hurdle of 130%, with a coupon make-whole provision.

The notes will be settled by shares or cash, or a combination of cash and shares.

Proceeds are earmarked for general corporate purposes.

B2Gold explores and develops mineral properties primarily in Colombia, Nicaragua, Uruguay and Namibia.

Spansion upsizes

Spansion's planned offering of convertible bonds was seen a little rich, according to some market players' models. But the deal priced at the midpoint of talk anyway.

Using a credit spread of 650 basis points over Libor and a 40% vol., the deal modeled at 98.5 at the midpoint of talk, according to a West Coast-based trader.

The underwriters were using a tighter spread of 550 bps over Libor and a 37% vol. The same trader got the deal to model 99.5 using those inputs at the midpoint.

He was of the opinion that this deal might be one of the first new issues that was mispriced out of the gate. But he wondered if high demand for paper due to limited supply would create a technical lift.

Another source said, "I heard that it's not a bad story, but at best the bonds appear fair value, so not that interesting."

He said that some players thought 37% vol. was too high and pointed out that the deal's seven-year maturity was viewed as unappealing to investors.

"Not hearing that people are excited to play," a Connecticut-based convertibles analyst said.

Navistar adds to around par

Navistar's 3% convertibles traded up to 99.875 and were seen "wrapped around par" toward the end of the session. Previously the bonds were seen at 99.375, a convertibles analyst said.

The bonds trade primarily outright. But Navistar shares rose 68 cents, or 2%, to $33.47 on the day.

There are some people putting the bonds on a small hedge, the analyst said.

With the stock up, he said that the convert trading action appeared to be outright holders taking profits on strength with hedge funds stepping and buying on weakness.

Overall, trading activity was "subdued," the analyst said.

Mentioned in this article:

B2Gold Corp. NYSE: BTG

Goldcorp Inc. NYSE: GG

Navistar International Corp. NYSE: NAV

Sterlite Industries (India) Ltd. NYSE: SLT

Spansion Inc. Nasdaq: CODE

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