Allegheny Technologies launches new deal; Pandora eyed after activist investors urge sales

By Rebecca Melvin

New York, May 17 – U.S. convertibles traded quietly on Tuesday but with a wider variety of issues changing hands on light volumes compared to more concentrated trading that has characterized recent sessions. Meanwhile, equities sold off following a strong rally on Monday.

After the market close, Allegheny Technologies Inc. launched an offering of $250 million of six-year convertible senior notes that was talked to yield 4.25% to 4.75% with a 25% to 30% initial conversion premium. The deal was expected to price after the market close on Wednesday.

The Pittsburgh-based steelmaker’s shares were unchanged during the session and in after-hours action as well.

Back in established issues, there were a variety of names trading, but pricing was generally static and there were no particular standouts, contrary to Monday’s session when Anacor Pharmaceuticals Inc.’s convertibles dominated trading action.

On Tuesday, Pandora Media Inc. was in focus but didn’t trade actively as shares of the internet radio company gained 6% after Corvex Management disclosed its 10% stake, making it the company’s single largest shareholder, and included a letter in its regulatory filing urging management to sell some assets and consider shareholder-value-maximizing strategies.

Social media has been a steady focus among convertibles investors, and several issues were trading again on Tuesday after strength seen on Monday.

LinkedIn Corp.’s 0.5% convertibles due 2019 traded up in the early going to 94 from 93.5 last on Monday, according to Trace data. LinkedIn shares were also up about 0.5% at $129.68.

But Twitter Inc.’s 0.25% convertibles due 2019 traded slightly lower at 88.132 compared to 88.25 to 88.50 last on Monday. The Twitter 1% convertibles due 2021 remained untraded at 84, after a 0.875-point gain on Monday. LinkedIn shares were little changed at $14.28 early Tuesday and closed up a nickel at $14.34.

Meanwhile, Tesla Motors Inc.’s 1.25% convertibles due 2021, which jumped 2.5 points on Monday, slipped back to about 86 from 87.8 last on Monday. Shares of the Palo Alto, Calif.-based electric car maker slipped $1.90, or 0.9%, to $206.39 in early action. The shares closed lower, along with a broader market sell-off, ending down $3.63, or 1.7%, at $204.66.

Inphi Corp.’s convertibles traded at 103 as shares of the Santa Clara, Calif.-based communications chip company slipped 95 cents, or 3%, to $28.53.

Also trading were the convertibles of CSG Systems International Inc. and Micron Technology Inc.

“There were a lot of different names trading, but nothing was particularly active,” a New York-based trader said. “Literally there were a ton of different names.”

Salesforce.com Inc. was also eyed ahead of its quarterly report, slated to be released after the market close. The bonds traded a few times in line with the underlying shares, which were down 54 cents, or 0.7%, to $76.77 at the close, a New York-based trader said.

Allegheny to price

Allegheny plans to price its registered, off-the-shelf deal after the market close on Wednesday. The $250 million deal has a $37.5 million greenshoe.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC and BofA Merrill Lynch are joint bookrunners of the notes, which are non-callable with no puts and have takeover and dividend protection.

Proceeds are earmarked for general corporate purposes, which may include voluntary or required contributions to the company’s defined benefit pension trust, or repurchases, repayment or refinancing debt.

Allegheny is a Pittsburgh-based specialty steel maker.

Pandora trades in line

Pandora’s 1.75% convertibles due 2020 traded at 94.47 versus an underlying share price of $10.76, a New York-based trader said.

Shares of the Oakland, Calif.-based internet radio service shares rose 6%, or 61 cents, to $10.59.

The convertibles traded “pretty much in line,” the trader said. But it didn’t trade actively.

Pandora’s largest shareholder, Corvex Management, has urged the company to sell some assets as it has a “costly and uncertain business plan” and is without “a thorough evaluation of all shareholder value-maximizing alternatives,” according to the Corvex Management letter.

Mentioned in this article:

Allegheny Technologies Inc. NYSE: ATI

Anacor Pharmaceuticals Inc. Nasdaq: ANAC

CSG Systems International Inc. Nasdaq: CSGS

Inphi Corp. Nasdaq: IPHI

LinkedIn Corp. Nasdaq: LNKD

Micron Technology Inc. NYSE: MU

Pandora Media Inc. NYSE: P

Salesforce.com Inc. NYSE: CRM

Tesla Motors Inc. Nasdaq: TSLA

Twitter Inc. Nasdaq: TWTR

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