New deals from Veeco Instruments, NICE Systems trade above par; Two Harbors added to pipeline

By Stephanie N. Rotondo

Seattle, Jan. 12 – New issues continued to be all the rage in the convertible bond market on Thursday, as fresh deals from Veeco Instruments Inc. and NICE Systems Inc. hit the tape.

“There is nothing going on outside of those two issues,” a trader said, noting that overall volume was higher than usual, but only because of Veeco and NICE.

“It was all new issues,” another trader said.

“Both are doing great,” he added.

Late Wednesday, Veeco priced $300 million of 2.7% convertible notes due 2023, with an initial conversion premium of 35%.

The deal came upsized from $200 million. Price talk was 2.625% to 3.125%, with a conversion premium of 37.5% to 42.5%.

By the bell, one trader pegged the paper at 101.5. Another saw the issue at 101.25 bid, 101.75 offered.

The second trader noted that around $220 million of the convertibles changed hands.

Early Thursday, the notes were trading in a 101.5 to 102 context, according to a trader.

The underlying equity, however, was down 80 cents, or 2.88%, at $27.00.

The issue was increased from $200 million, and the greenshoe was upsized from $30 million.

Barclays Capital Inc. and Wells Fargo Securities LLC ran the deal.

Proceeds will be used to fund potential acquisitions, to repurchase shares and for other general corporate purposes.

As for the NICE deal, the company sold $250 million of 1.25% exchangeable senior notes due 2024, with an exchange premium of 22.5%.

The yield came richer than the 1.5% to 2% talk. The exchange premium was also on the rich end of the 17.5% to 22.5% talk. The deal came upsized from $225 million.

Towards the end of the day, the issue was seen moving all the way up to a 104 to 104.375 context, a trader said, adding that about $154 million of the convertibles traded.

A second sellsider saw the bonds at 104.

Earlier in the session, a trader pegged the paper at 104 bid, 104.5 offered.

“I guess they liked the pricing,” he said.

The equity was also faring better, moving up $1.68, or 2.47%, to $69.56.

J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Citigroup Global Markets Inc. were the bookrunners for the Rule 144A deal.

The company plans to enter into convertible note hedge transactions with a strike price of $101.82, increasing the effective exchange premium from the company’s perspective to 50%.

Proceeds will be used, in part, to pay the $17.5 million cost of the hedging transactions, as well as to repay a portion of the outstanding borrowings under a term loan facility.

The sale of the exchangeable securities is expected to benefit the existing capital structure by providing a low, fixed interest rate, a longer maturity and enhanced balance sheet flexibility. The company also said that it has authorized a new and enlarged share repurchase program of $150 million.

Additionally, the company plans to eliminate its stock dividend in the first quarter of 2017.

Two Harbors announces

The pipeline wasn’t showing any signs of slowing, either.

Two Harbors Investment Corp. announced a $250 million sale of convertible senior notes due 2022.

The yield is talked at 6% to 6.25%, according to a market source. The conversion price is slated to be $10 per share, representing a conversion premium of approximately 13.51%.

Credit Suisse Securities (USA) LLC is the sole bookrunner.

There is a $37.5 million over-allotment option.

Ahead of pricing, the equity dipped 4 cents to $8.81.

Proceeds will be used to fund the business and investment activities of the company and its subsidiaries, which may include acquisitions, and for general corporate purposes.

Two Harbors is a New York-based real estate investment trust that invests in residential mortgage-backed securities, mortgage servicing rights, commercial real estate and other financial assets.

Mentioned in this article:

NICE Systems Ltd. Nasdaq: NICE

Two Harbors Investment Corp. NYSE: TWO

Veeco Instruments Inc. Nadaq: VECO

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