Echo Global jumps in active trade on debut; salesforce.com in line; LinkedIn adds on swap

By Rebecca Melvin

New York, April 30 – Echo Global Logistics Inc.’s newly priced 2.5% convertible bonds gained on an outright basis and added on swap Thursday on their debut in secondary market trading. The issuer priced an upsized $200 million of the five-year senior notes through the rich end of price talk.

The new notes jumped to 104 out of the gate and then pulled back to 102 by late morning as shares of the Akron, Ohio, plastics and resins supplier came off, a New York-based trader said. Later the shares pulled back even farther amid a general down draft in equities.

Echo was the single most actively traded name in the convertibles space on Thursday.

Also in the primary market, CalAmp Corp., an Oxnard, Calif.-based developer and marketer of wireless communications products, was expected to price $125 million of five-year convertible senior notes after the market close.

Back in established issues, salesforce.com Inc.’s convertibles continued to trade in step with shares of the San Francisco-based cloud computing company after a pop Wednesday amid chatter about a potential sale of the large cloud company.

The salesforce.com 0.25% convertibles due 2018 traded at 124.7 early Thursday with shares around $71.80.

Given the bond’s matrix on a takeover, a deal “looks fairly uneventful for swap guys,” a New York-based trader said.

Euronet Worldwide Inc. showed up on the Trace tape after the Leawood, Kan.-based electronic payments provider reported profit that beat estimates by 2 cents but missed on revenue. Euronet shares were down 4% on the news at $58.50. Euronet’s 1.5% convertibles due 2044 traded down 2 points at 109.375, according to Trace data.

Euronet was noted as a name favored by many outright investors.

Investors eyed LinkedIn Corp.’s convertibles ahead of the Mountain View, Calif.-based social media company’s quarterly earnings report posted after the market close.

The bonds gained on swap as shares tanked in after-hours action in response to the disappointing outlook for earnings and revenue.

In the broader markets, equities moved sharply lower, with the Nasdaq Composite index dropping 82.22 points, or 1.6%, to 4,941.42; the S&P 500 stock index fell 21.34 points, or 1%, to 2,085.51, and the Dow Jones industrial average dropped 195.01 points, or 1.1%, to 17,840.52.

New Echo adds on swap

Echo Global’s newly priced 2.5% convertibles traded up to 104 and later at 102 with shares down 1.8%, at $29.11. Later the shares slipped further, closing down 74 cents, or 2.5%, at $28.90.

Initially, the bonds were seen up 2.25 points on a dollar-neutral basis, a Connecticut-based trader said. A second trader said the bonds were up 3 points to 3.5 points on swap.

The gain came despite the deal being upsized to $200 million from $150 million and coming on the rich end of talked terms, the second trader said, adding “it shows you the desire for new paper.”

The Echo notes came concurrently with a secondary offering of common stock at $29.00 each, or about $145 million in proceeds.

Both the notes and the stock were sold via joint bookrunners Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC. PNC Capital Markets LLC acted as co-manager of the notes offering.

Proceeds from both deals will be used to fund a portion of the purchase price of the issuer’s previously announced Command Transportation LLC acquisition. In the event that the acquisition is not consummated, the company plans to use proceeds to redeem the notes and for working capital and general corporate purposes.

The company has the right to redeem the notes Nov. 3 if the acquisition is not completed. The notes have dividend and takeover protection and mature May 1, 2020.

Chicago-based Echo Global is a provider of technology-enabled transportation and supply chain management services.

LinkedIn expands

LinkedIn’s 0.5% convertibles due 2019 slumped to 99 as shares nose-dived 25% in response to a bleak outlook that was posted after the market close.

The shares were later seen slightly better, but still down $51.53, or 20%, to $200.60.

During regular hours, the LinkedIn bonds traded down a point at 111 and closed at 111.125.

“The bonds are +2 points and should go higher,” a trader said. “It’s a big win for swap guys and a tough one for outright bonds.”

The company’s first-quarter loss widened to $43 million, or 34 cents a share, compared to a year-earlier loss of $13.5 million, or 11 cents.

Excluding one-time items, LinkedIn said it earned 57 cents a share, which was in line with estimates. Revenue was $637.7 million compared to $473 million in the year-earlier period.

For the current quarter, the business-oriented social media company said earnings excluding items was expected to be 28 cents per share, which is far below the 74-cent-per-share that analysts were estimating. Full-year adjusted earnings were forecast at $1.90, sharply lower than the $3.05 estimated by analysts.

The company expects revenue of $670 million to $675 million for the second quarter, which was below estimates for $720 million.

On Wednesday, Twitter Inc.’s convertibles disappointed when they fell in line on disappointing earnings. Amid a 25% down draft in the shares, the bonds should have “gotten a lot better,” a trader said.

A lack of demand for the shares contributed to the bonds’ inability to perform better on a convertible arb basis, the trader said.

Mentioned in this article:

A. Schulman Inc. Nasdaq: SHLM

CalAmp Corp. Nasdaq: CAMP

Echo Global Logistics Inc. Nasdaq: ECHO

LinkedIn Inc. Nasdaq: LNKD

salesforce.com Inc. NYSE: CRM

Twitter Inc. Nasdaq: TWTR

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