Weatherford offers $1 billion notes; Softbank/Alibaba deal looks cheap; secondary heavy

By Rebecca Melvin

New York, June 1 – Weatherford International plc launched an offering of five-year exchangeable senior notes after the market close on Wednesday for pricing early Thursday.

Weatherford’s common shares tanked in after-hours trading on the New York Stock Exchange, falling more than 11% on the heels of the news before recovering some to trade down only 6%.

The notes are being talked at a 5.625% to 5.875% coupon and 37.5% to 40% initial exchange premium.

Last September, the international oilfield services company launched and subsequently pulled a $1 billion mandatory deal that was talked at a 6.25% to 6.75% dividend and 22.5% to 27.5% premium. The reason cited for pulling that deal was that although investor interest was strong, the company was unwilling to sell securities at pricing that did not reflect the value of Weatherford.

Also in the primary market, Softbank Group Corp.’s planned $5 billion of mandatory exchangeables into Alibaba Group Holding Ltd. valued cheaply and were expected to “do fine” in the market after pricing late Wednesday, a New York-based trader said.

The Alibaba mandatory looked about 3% cheap, using a credit spread of 125 basis points over Libor and a 33% to 30% vol., the trader said.

There should be plenty of crossover demand, and it should do fine, the trader said. “It models cheap enough and gives guys exposure to a big, widely held tech name.”

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