NXP Semiconductors adds a point on swap; Workday lower with shares; Intel adds for week

By Rebecca Melvin

New York, Nov. 25 – NXP Semiconductors NV’s new 1% convertibles traded up outright and added on a dollar-neutral, or hedged, basis Tuesday after the Dutch semiconductor components company priced $1 billion of the new notes at the cheap end of talked terms.

The new NXP convertible was seen at 100.75 bid, 101.25 offered before the market open and later traded at 101.375, according market sources. On swap, they were seen up a point.

The new deal seemed to perform in line with expectations. Prior to pricing, a syndicate source said he expected the deal to trade up but not by as much as LinkedIn Corp.’s recent $1.15 billion deal did on its debut earlier this month.

“This will trade up – not like LinkedIn – but it will trade up,” the source said.

The LinkedIn 0.5% convertibles moved up to 102.25 bid, 102.75 offered on first-day trading with shares at $225.00.

Back in established issues, Workday Inc.’s convertibles were in focus after the Pleasanton, Calif.-based cloud-based computing company posted earnings that sent its shares lower by nearly 6%.

The Workday 1.5% convertibles traded down to about 128 compared to a previous level of 132. The Workday 0.75% convertible traded down to 123.5 from about 128.

Overall, the convertibles market remained “better to buy” for the second day of the holiday shortened week.

Better to buy is when there is a strong bid in the market.

“Accounts are putting money to work in balanced names,” a New York-based trader said, referring to at-the-money issues in the par to 130 range and with three to five years left until maturity.

He said that for the week, the market is better on a valuation basis.

For example, Intel Corp.’s 2.95% convertibles expanded 0.75 point this week following a Barron’s magazine article that predicted 30% upside for the Santa Clara, Calif.-based chipmaker.

Other names that have improved include recent low-coupon, three- to five-year deals, including Red Hat Inc. and LinkedIn. Tesla Motors Inc., Web.com Inc. and Citrix Systems Inc. are other names that have improved, the trader said.

For November, convertible hedge funds did better than for October.

“This month was better,” the trader said.

Some hedge funds were caught off guard by the magnitude of the correction and some of the deep in-the-money paper such as Microchip Technology Inc. that came in on a valuation basis have not yet returned to previous highs, he explained. But the snap back has helped in-the-money, balanced names.

The magnitude of the snap back also caught some people off guard, he said. But right now the fundamental accounts are dictating tone. “They have money to put to work,” and they are supporting pricing, he said.

Otherwise on Tuesday there was some trimming of positions ahead of month end, a second New York-based trader said. But pricing was steady and things were generally quiet ahead of the Thanksgiving holiday Thursday.

There is one more full day of trading on Wednesday for the holiday shortened week. Financial markets will be closed on Thursday for Thanksgiving, with an early close for both stock and bond markets on Friday.

New NXP adds a point

NXP’s newly priced 1% convertibles were seen up at about 101, market sources said.

NXP shares traded up by as much as 2% but ended off by 3 cents at $76.15.

The deal was the primary focus of Tuesday’s market, but sources didn’t have many descriptive words for it, other than it earned a point on its debut as expected.

The deal sold primarily under Rule 144A, but is also Regulation S and priced at the cheap end of talked terms.

Terms were talked at a 0.5% to 1% coupon and a 35% to 40% initial conversion premium.

Allocations were about right down the middle between hedged and outright participation, a syndicate source said.

The company’s shares were not very volatile either before or after pricing. The company bought back shares with proceeds of the offering, and the deal also came concurrently with convertible note hedge and warrant transactions, or a call spread.

Joint bookrunners were Morgan Stanley & Co. LLC, Barclays, BofA Merrill Lynch, Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc.

NXP is based in Eindhoven, the Netherlands.

Workday slips with shares

Workday bonds traded some but were not overly active.

Workday’s 0.75% convertibles due 2018 traded at 121.56, which was down 6.8 points outright, according to Trace data early in the session.

Workday’s 1.5% convertibles due 2020 were seen at around 128, according to Trace.

Shares fell $5.12, or 5.5%, to $87.37.

Late Monday, the cloud financial and human resources software applications company beat fiscal third-quarter estimates and forecast higher current quarter revenue.

The company lost $59.9 million for the quarter, or 33 cents per share. The adjusted loss was 3 cents per share, which was better than expected.

Revenue was $215.1 million, which was better than the $205.8 million expected.

Mentioned in this article:

Intel Corp. Nasdaq: INTC

LinkedIn Corp. Nasdaq: LNKD

NXP Semiconductors NV Nasdaq: NXPI

Workday Inc. Nasdaq: WDAY

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