Blackstone Mortgage in market; recent deals in play; BroadSoft hit post-earnings

By Stephanie N. Rotondo

Seattle, May 1 – The convertible bond primary market kicked off the week with a new deal added to the calendar.

Blackstone Mortgage Trust Inc. said it was offering $250 million of convertible senior notes due May 1, 2022.

Price talk is for a 3.875% to 4.375% yield and an initial conversion premium of 15% to 20%. Though pricing was expected after Monday’s close, details had not emerged as of press time.

The company did hold an investor call at 11 a.m. ET.

Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, BofA Merrill Lynch, Barclays and J.P. Morgan Securities LLC are running the books.

Ahead of pricing, the company’s shares were firming, moving up 14 cents to $31.01.

Meanwhile, Neurocrine Biosciences Inc.’s $450 million of 2.25% convertible senior notes due 2024 – a deal priced late Wednesday – were seen trading up to a range of 105 to 106 on Monday.

The paper was pegged in a 104.75 to 105 context earlier in the day.

The company’s equity improved $1.25, or 2.34%, to $54.65.

The issue came richer than the 2.5% to 3% yield talk. The initial conversion premium of 42.5% was on the rich side of the 37.5% to 42.5% talk.

Barclays and Jefferies LLC ran the books.

Also from Wednesday’s business, Flexion Therapeutics Inc.’s $175 million of 3.375% convertible senior notes due 2024 added 2 points outright, quoted at 105.5 bid, 106 offered, according to a market source.

The underlying equity was up 60 cents, or 2.94%, to $21.01.

The deal came with an initial conversion premium of 30%. Its yield came in the middle of the 3.125% to 3.625% price talk.

Wells Fargo Securities LLC, BMO Capital Markets and RBC Capital Markets were the bookrunners.

Away from recently priced issues, BroadSoft Inc.’s convertible bonds were getting hit in the wake of mixed quarterly results and a downward guidance revision.

The company’s stock didn’t do so well either, losing 8.33% on the day.

BroadSoft’s beat down

BroadSoft’s convertibles took a tumble on Monday after the company reported mixed results for its first quarter.

A downward revision to guidance for the current quarter and the year didn’t help matters either.

A market source saw the 1.5% convertible notes due 2018 ending on either side of 107. While that was in line with recent smaller-sized trades, it was off 8 to 9 points from the last round-lot trades.

The 1% convertible notes due 2022 – the more active of the two issues – were meantime seen finishing with a 110-handle. That was down about 5 points.

For the quarter, the Gaithersburg, Md.-based communications software and service provider reported adjusted net income of $6.2 million, or 19 cents per share. That compared to adjusted net in come of $11.1 million, or 37 cents per share, the year before.

Revenue grew 8.9% to $79.7 million – despite a 10.8% decline in license software revenue.

EPS was better than analysts’ projections of 16 cents a share, though revenue was lower than the $80.4 million forecast.

For the current quarter, the company is expecting revenue between $84 million and $88 million, with adjusted EPS coming in at 20 cents to 32 cents.

Consensus estimates had predicted revenue of $91.7 million and EPS of 45 cents.

For the year, BroadSoft lowered its revenue guidance to $380 million to $390 million.

The company had said revenue would be between $390 million and $400 million previously.

It did, however, keep the year’s EPS guidance steady at $2.20 to $2.50 a share.

Synchronoss remains topical

Synchronoss Technologies Inc.’s 0.75% convertible notes due 2019 were still milling about, according to one New York-based sellside source.

The source deemed the debt unchanged in an 86 to 86.25 range.

“Somebody’s into a 7.4% yield,” he said.

The underlying stock dropped $1.17, or 7.31%, to $14.83.

The name started to move toward center stage on April 25 when the Bridgewater Township, N.J.-based technology company announced the departure of two top executives and also downwardly revised its first-quarter guidance to levels well below what analysts were expecting.

The news initially resulted in a 9-point decline for the convertibles, though the equity didn’t fare much better.

On Friday, Moody’s Investors Service and S&P Global Ratings said they were considering downgrading the company’s credit ratings.

FelCor flies around

FelCor Lodging Trust Inc.’s $1.95 series A cumulative convertible preferred stock (NYSE: FCHPrA) saw a massive amount of trading on Monday, though the paper ultimately ended the session unchanged.

The paper closed at $25.30, with about 1.18 million shares changing hands.

The name has been notable since it was announced on April 25 that the company was being taken over by RLJ Lodging.

The deal is valued at $1.18 billion, or $8.54 per each share of FelCor stock – a 16.7% premium over Friday’s closing share price.

Under the terms of the taxable merger, FelCor shareholders will receive 0.362 of a share of RLJ stock for each of their shares.

The merger will create one of the largest REITs in the United States. Once completed, RLJ will own about 71% of the combined entity and FelCor stockholders will own the remainder.

About two months ago, Ashford Hospitality Trust Inc. made a bid for FelCor valued at $1.27 billion. However, shareholder and activist hedge fund Land and Buildings Investment Management LLC criticized the offer, calling it “woefully inadequate.”

The RLJ-FelCor deal is expected to results in annual cost savings of $22 million. The deal is expected to close by the end of the year.

Mentioned in this article:

Blackstone Mortgage Trust Inc. NYSE: BXMT

BroadSoft Inc. Nasdaq: BSFT

FelCor Lodging Trust Inc. NYSE: FCH

Neurocrine Biosciences Inc. Nasdaq: NBIX

Synchronoss Technologies Inc. Nasdaq: SNCR

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