Qihoo convertible notes slip on hedge; Verint paper trades in line; Web.com notes slip

By Rebecca Melvin

New York, Aug. 4 – U.S. convertibles were mostly quiet on Monday as summer vacation schedules seemed to kick into a higher gear and as equities meandered in the early going before ending the session higher. But convertibles felt a little heavier.

Topical names were in focus. Qihoo 360 Technology Co. Ltd.’s two new convertibles traded higher on an outright basis, with shares higher, but they were flat to lower on a hedged basis amid outright sellers in the name.

Verint Systems Inc.’s recent new issue saw some action and was generally in line with where it had been, although “in a little from the highs.” The issue was still seen having performed very well and traded only a few times on Monday as a couple of buyers stepped in to scoop up one seller’s offering, a New York-based trader said.

Meanwhile, Web.com Group Inc.’s 1% convertible notes due 2018 continued to see some outright sellers and was a little lower on a hedged basis after the issue plunged more than 10 points on an outright basis on Friday but improved on a hedged, basis.

The Jacksonville, Fla.-based global domain name register reported quarterly results that missed revenue estimates, and shares dropped 24% on Friday. On Monday, with shares down another 1%, the paper was a bit weaker with sellers on credit fears.

Elsewhere, trading was said to be mostly quiet.

“It’s very slow this morning. A lot of people are on vacation, a New York-based trader said.

A couple of earnings reports were in focus, a Connecticut-based sellsider said, but trading in the convertibles attached to those reports was also quiet, sources said.

Intelsat SA’s 5.75% mandatory convertible preferreds looked to be about in line in tandem with strength in the mandatory’s underlying shares after the Luxembourg-based fixed satellite services provider reported a profit for its second quarter, compared to a loss for the same period last year and reaffirmed full-year revenue guidance that was in line with analysts’ expectations.

The Intelsat mandatory, which has a 50 par, was last at 50.84. That was up 2.5 points outright, or 5%, with the underlying shares of the company up 67 cents, or 3.7% at $18.80.

BroadSoft Inc.’s 1.5% convertibles due 2018 were not heard in trade, but were last around 100. Shares surged 9% or 10% but ended up only 1.5% after the Gaithersburg, Md.-based telecom software maker reported second-quarter earnings and revenue that beat estimates and guided full-year earnings above estimates.

The company also announced its acquisition of Systems Design & Development Inc.

Qihoos slip slightly

Both of Qihoo’s convertible tranches, which debuted in the secondary market on Friday, were seen last at about 102.5 with the underlying shares at $94.65. Earlier the paper was quoted at 102 with the underlying shares a little lower at nearly $94.00.

Shares moved up $4.13, or 4.6%, on the day.

The new notes were called “a little lower on swap, by about 0.25 point,” a trader said.

There were outright sellers, and the paper appeared to be moving more into hedged hands, he said.

The Qihoo 0.75% convertibles due 2020 and the 1.75% convertibles due 2021 are dual tranches of $450 million each. On their debut on Friday they were seen better on hedge by about 0.5 point to 0.75 point.

The Beijing-based PC and mobile internet security products company priced the $900 million of notes at what was essentially the midpoint of talk. The premium of the seven-year notes came at the cheap end of talk, however.

The Rule 144A and Regulation S offering has a greenshoe for $135 million of additional notes, or $67.5 million per tranche.

Bookrunners were Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC. Co-managers were UBS Securities LLC and China Renaissance.

Verint trades in line

Verint’s 1.5% convertibles due 2021, of which $400 million priced June 12, were quoted at 101.75 bid, 102 offered near the market close with the underlying shares at $47.20.

Shares of the Melville, N.Y.-based software and hardware security company added 37 cents, or 0.8%, to $47.15 on the day.

“They were pretty much in line,” a trader said, but he said they have contracted slightly from their highs on a hedged basis.

On an outright basis, they had gotten to as high as 103.5, and on swap they were another 0.75 point higher, he said.

“They have still done very well,” he said of the issue. “There was one seller and a couple of buyers.”

Web.com slips

Web.com’s 1% convertibles due 2018 were seen down at 91.25 with the underlying shares at $19.90 late on Monday, compared to 91.875 bid, 92.875 offered with the shares at $20.10 on Friday.

Shares slipped another 1% after plunging 24% on Friday.

Also on Friday, the bonds were said to have expanded slightly by about 0.5 point on a hedged basis.

“There was little activity in Web.com, with outright sellers, and they were a little lower on credit fears following the earnings miss last week and lower shares,” a New York-based trader said.

The company reported better earnings of $38.4 million, compared to $34.4 million of the year-earlier period, which was in line with expectations. But revenue, which rose 10% to $144.66 million from the year-earlier period, was lower than estimated. The company’s guidance range was for $146 million to $147.5 million of revenue.

The company’s securities took a similar hit at the end of June on news that Google is entering the domain registration business with an invitation-only beta website.

Mentioned in this article:

BroadSoft Inc. Nasdaq: BSFT

Intelsat SA NYSE: I

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

Verint Systems Inc. Nasdaq: VRNT

Web.com Group Inc. Nasdaq: WWWW

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