Carbonite surges outright on takeout news, but seen unchanged to lower on swap; J2 Global on tap

By Rebecca Melvin

New York, Nov. 11 – In what was otherwise a quiet Monday holiday session, Carbonite Inc.’s 2.5% convertible senior notes due 2022 garnered attention as the issue jumped about 15 points on an outright basis after news that the Boston-based cybersecurity firm has inked a definitive agreement to be acquired by OpenText Corp. for $23.00 per share in cash.

After the market close, J2 Global Inc. announced that it plans to sell $500 million of seven-year convertible senior notes. The deal was being talked to yield 1.5% to 2% with an initial conversion premium of 30% to 35%, and is expected to price after the market close on Tuesday, according to market sources.

Away from Carbonite, the Veterans Day session was uneventful, sources said, with most of the day’s headlines not germane to convertibles. U.S. stocks started the day weighed by concerns that the United States and China have been unable as yet to hammer out an initial trade deal and that the structure and timing of any deal are still not forthcoming. But by the end of the session, the Dow Jones industrial average had nudged into positive territory and the S&P 500 stock index closed down only 7.40 points, or 0.24%, to 3,085.68. Bond markets were closed in observance of Veterans Day.

Among names that did see some decent flow in trade on Monday were a pair of Booking Holdings Inc. convertibles as well as Microchip Technology Inc.’s 1.625% notes due 2025.

These bonds were trading actively on no apparent news, a New York-based market source said.

Carbonite up outright

The price tag for Carbonite represented a 25% premium to the company’s closing stock price on Friday.

On a dollar neutral basis, the Carbonite bonds were seen roughly unchanged to negative, depending on the delta hedge percentage on which holders were set up.

The bonds were seen about 0.75 point lower on swap for those set up on about a 40% delta coming in, New York-based market sources said.

They “may have actually leaked a touch if you weren’t running them lighter than the theoretical delta coming into the announcement,” the source said.

The Carbonite bonds were seen trading around 105.625, which was up from 90 to 91 previously. The common stock jumped nearly25% to close up $4.55 to $22.95.

Carbonite priced $143.75 million of the 2.5% bonds in March 2017.

J2 Global on tap

The Los Angeles-based internet services provider plans to sell $500 million of seven-year convertible senior notes after the market close Tuesday that were talked to yield 1.5% to 2% with an initial conversion premium of 30% to 35%, according to market sources.

Proceeds are intended to pay off all amounts outstanding under an existing senior secured credit facility of J2 Global’s wholly owned subsidiary, J2 Cloud Services, LLC. The remainder of proceeds are earmarked for general corporate purposes, which may include acquisitions although J2 Global does not have any agreements or commitments for any material acquisitions or investments at this time.

The Rule 144A deal has a $50 million greenshoe and was being sold via J.P. Morgan and Barclays as active bookrunners.

The notes are non-callable for life with no puts.

They have takeover protection via a standard make-whole table and dividend protection.

Microchip, Booking active

Microchip bonds changed hands at 196.185, according to Trace data. The stock underlying the bonds traded in negative territory for much of the session, slipping to their lows of the day into the close, where they ended the session down $1.64, or 1.7%, at $94.57.

The Chandler, Ariz.-based maker of microcontroller, memory and analog semiconductors reported earnings last week, when the stock fell to $94.00 from about $101.00.

Booking’s 0.35% convertibles due 2020 traded down 1.1 points to 142.22, according to Trace data; and the Booking 0.9% convertibles due 2021 were off 1.8 points to 112.5. Shares of the online travel company traded in positive territory during the session, rising to their highs of the session into the market close. They closed up $16.85, 0.9%, to $1,896.04.

All three of these issues are “just decent-size cap structures,” a New York-based market source said, meaning that they are large, liquid issues.

Microchip’s 1.625% note is a $1.5 billion deal.

Wayfair Inc.’s 0.375% convertibles due 2022 traded down a point to 105.1 with the underlying shares of the online retailer down $1.00, or 1%, to $83.26.

Otherwise, the session overall for convertible was “pretty quiet” with a lot of people out of the office due to the federal holiday in observance of Veterans Day, a New York-based source said.

Mentioned in this article:

Booking Holdings Inc. Nasdaq: BKNG

Carbonite Inc. Nasdaq: CARB

J2 Global Inc. Nasdaq: JCOM

Microchip Technology Inc. Nasdaq: MCHP

Wayfair Inc. Nasdaq: W

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