The Week That Was... In Convertibles.
July 22 / Kathy Schick
We are now in the midst of earnings season and there were several companies reporting this week, but before we jump into that, we did have a couple of new issues this week. On Wednesday, Blackhawk Network Holdings (HAWK) announced a $425 million senior convert deal due 2022. The company is also amending its credit facility, which will total $700 million maturing in 2021, with a $200 million term loan expected to be outstanding following both transactions. Proceeds will be used to repay the original credit facility, to repurchase common shares from purchasers of the new converts (at least $35 million), a convertible note hedge, and general corporate purposes including acquisitions. HAWK has a leading prepaid payment network including gift, telecom, and debit cards. Based upon initial price talk of 1.75% up 37.5% with just over a 5.5 year maturity, the converts received an initial HOCS score of 67 Overall / 70 Growth / 62 Safety. That is a very good score and the safety score underlines the company’s ability to generate cash flow. Indeed, the deal came to market with a 1.50% and 42.5% conversion premium, and expanded two points right out of the gate. At a recent price of 102 ½ vs. $35.50, the updated HOCS score is significantly lower, with a 59/64/50 slash line. But that’s how new issues are supposed to work.
Also on Wednesday, Belden (BDC) announced $450 million of 6.75% mandatory convertible preferred shares due 2019. BDC is a signal transmission solutions company and proceeds will be used for general corporate purposes including acquisitions, capital spending, and business expansion. Dennis Dowden will have an update on the company for Monday’s Hybrid Vigor.
On the earnings front, Rambus (RMBS) announced results that beat both the revenue and EPS consensus estimates on Monday. Yahoo (YHOO) also reported on Monday. Results were mixed with revenues exceeding expectations while EPS missed. The company provided very little information on the bidding process other than to say it was deep into the proposals. It has been reported there are five companies left in the process and a decision may be announced by the end of the month.
On Tuesday, Helix Energy (HLX) reported in-line EPS but missed on the revenue line. Despite the lackluster results the shares surged 10%, maybe after being so beat up it doesn’t take much in the energy sector to get a pop in the stock. Johnson & Johnson reported results that exceeded both the EPS and revenue estimates.
On Wednesday, Medidata Solutions (MDSO) reported results that beat the revenue and EPS consensus estimates. The company reiterated full-year guidance. The stock rallied 14% on the good results. Also exceeding expectations was Newmont Mining (NEM) benefitting from higher production and lower costs and of course the surge in gold prices this year. SL Green Realty (SLG) beat on the top line but missed on EPS. Intel (INTC) also posted mixed results, with EPS exceeding estimates and revenue falling short. JAKKS Pacific (JAKK) reported EPS that was in-line and revenue that exceeded. The stock was up 4%.
On Thursday, Proofpoint (PFPT) reported results that exceeded both the revenue and EPS consensus estimates. Management also increased full-year revenue guidance. The stock was up nearly 10% on the news as of this writing. Altra Industrial Motion (AIMC) beat on the bottom line but missed on revenues. The same is true for Pandora Media (P), which attributed the revenue shortfall to softness in national advertising in the entertainment and telecommunications sectors. Be on the lookout for additional color from Jeff Alton in Monday’s Hybrid Vigor. Trinity Industries (TRN) beat the EPS consensus and revenues were in-line. Southwest Airlines (LUV) missed both the revenue and EPS consensus estimates. Management cautioned that the fare environment would remain challenging. The shares were down over 11% on the news.
In other news this week, ANI Pharmaceuticals (ANIP) announced the FDA has approved its abbreviated new drug application (ANDA) for nilutamide tablets, a generic anti-cancer treatment. The product was launched immediately……… SolarCity (SCTY) announced it had raised $345 million in funds for new solar projects. The company also increased its debt aggregation facility to $760 million, an increase of $110 million……… Teva Pharmaceuticals (TEVA) has priced $15 billion of senior notes across six tranches with interest rates in a range of 1.4% to 4.1% and maturities between 2018 and 2046. Subsequently the company also priced CHF 1 billion and Euro 4 billion of bonds. All proceeds will be used for the cash portion of the Actavis Generics acquisition……… Ionis Pharmaceuticals (IONS) has earned a $10 million licensing fee from Janssen Biotech. IONS licensed a drug that will be evaluated for a gastrointestinal (GI) autoimmune disease……… Nuance Communications (NUAN) will acquire TouchCommerce, a digital customer service and engagement solutions company, for $215 million comprised of cash and stock. The acquisition will accelerate the growth of NUAN’s enterprise business……… Anthem’s (ANTM) acquisition of Cigna has been blocked by the department of justice (DOJ) on grounds that competition would be reduced and prices would increase for consumers. The DOJ is also blocking Aetna’s acquisition of Humana for the same reasons.
For the upcoming week, we have earnings from DHR and EFII on Monday; ATI, AKAM, AKS, ASH, BXMT, CMCSA, CTXS, HURN, ILMN, JBLU, JNS, NUVA, TWTR, WNC, and XRS on Tuesday; CSV, ECHO, EEFT, ESRT, EXR, HOLX, INFN, LH, LRCX, MDCO, MOH, NOW, QDEL, QTM, SFLY, TTMI, XLNX for Wednesday; ACOR, ALI, ARIA, AVHI, BMY, CAA, CATM, CPHD, CY, GNC, GTLS, HLS, IART, INVN, KAMN, LYV, MTH, N, NXPI, ROVI, RPM, SFE, SPNC, STNG, TFX, VRSN, WFT, WCC, WLL, WDC on Thursday; and FOR and SWC on Friday.
Enjoy your weekend!
We are now in the midst of earnings season and there were several companies reporting this week, but before we jump into that, we did have a couple of new issues this week. On Wednesday, Blackhawk Network Holdings (HAWK) announced a $425 million senior convert deal due 2022. The company is also amending its credit facility, which will total $700 million maturing in 2021, with a $200 million term loan expected to be outstanding following both transactions. Proceeds will be used to repay the original credit facility, to repurchase common shares from purchasers of the new converts (at least $35 million), a convertible note hedge, and general corporate purposes including acquisitions. HAWK has a leading prepaid payment network including gift, telecom, and debit cards. Based upon initial price talk of 1.75% up 37.5% with just over a 5.5 year maturity, the converts received an initial HOCS score of 67 Overall / 70 Growth / 62 Safety. That is a very good score and the safety score underlines the company’s ability to generate cash flow. Indeed, the deal came to market with a 1.50% and 42.5% conversion premium, and expanded two points right out of the gate. At a recent price of 102 ½ vs. $35.50, the updated HOCS score is significantly lower, with a 59/64/50 slash line. But that’s how new issues are supposed to work.
Also on Wednesday, Belden (BDC) announced $450 million of 6.75% mandatory convertible preferred shares due 2019. BDC is a signal transmission solutions company and proceeds will be used for general corporate purposes including acquisitions, capital spending, and business expansion. Dennis Dowden will have an update on the company for Monday’s Hybrid Vigor.
On the earnings front, Rambus (RMBS) announced results that beat both the revenue and EPS consensus estimates on Monday. Yahoo (YHOO) also reported on Monday. Results were mixed with revenues exceeding expectations while EPS missed. The company provided very little information on the bidding process other than to say it was deep into the proposals. It has been reported there are five companies left in the process and a decision may be announced by the end of the month.
On Tuesday, Helix Energy (HLX) reported in-line EPS but missed on the revenue line. Despite the lackluster results the shares surged 10%, maybe after being so beat up it doesn’t take much in the energy sector to get a pop in the stock. Johnson & Johnson reported results that exceeded both the EPS and revenue estimates.
On Wednesday, Medidata Solutions (MDSO) reported results that beat the revenue and EPS consensus estimates. The company reiterated full-year guidance. The stock rallied 14% on the good results. Also exceeding expectations was Newmont Mining (NEM) benefitting from higher production and lower costs and of course the surge in gold prices this year. SL Green Realty (SLG) beat on the top line but missed on EPS. Intel (INTC) also posted mixed results, with EPS exceeding estimates and revenue falling short. JAKKS Pacific (JAKK) reported EPS that was in-line and revenue that exceeded. The stock was up 4%.
On Thursday, Proofpoint (PFPT) reported results that exceeded both the revenue and EPS consensus estimates. Management also increased full-year revenue guidance. The stock was up nearly 10% on the news as of this writing. Altra Industrial Motion (AIMC) beat on the bottom line but missed on revenues. The same is true for Pandora Media (P), which attributed the revenue shortfall to softness in national advertising in the entertainment and telecommunications sectors. Be on the lookout for additional color from Jeff Alton in Monday’s Hybrid Vigor. Trinity Industries (TRN) beat the EPS consensus and revenues were in-line. Southwest Airlines (LUV) missed both the revenue and EPS consensus estimates. Management cautioned that the fare environment would remain challenging. The shares were down over 11% on the news.
In other news this week, ANI Pharmaceuticals (ANIP) announced the FDA has approved its abbreviated new drug application (ANDA) for nilutamide tablets, a generic anti-cancer treatment. The product was launched immediately……… SolarCity (SCTY) announced it had raised $345 million in funds for new solar projects. The company also increased its debt aggregation facility to $760 million, an increase of $110 million……… Teva Pharmaceuticals (TEVA) has priced $15 billion of senior notes across six tranches with interest rates in a range of 1.4% to 4.1% and maturities between 2018 and 2046. Subsequently the company also priced CHF 1 billion and Euro 4 billion of bonds. All proceeds will be used for the cash portion of the Actavis Generics acquisition……… Ionis Pharmaceuticals (IONS) has earned a $10 million licensing fee from Janssen Biotech. IONS licensed a drug that will be evaluated for a gastrointestinal (GI) autoimmune disease……… Nuance Communications (NUAN) will acquire TouchCommerce, a digital customer service and engagement solutions company, for $215 million comprised of cash and stock. The acquisition will accelerate the growth of NUAN’s enterprise business……… Anthem’s (ANTM) acquisition of Cigna has been blocked by the department of justice (DOJ) on grounds that competition would be reduced and prices would increase for consumers. The DOJ is also blocking Aetna’s acquisition of Humana for the same reasons.
For the upcoming week, we have earnings from DHR and EFII on Monday; ATI, AKAM, AKS, ASH, BXMT, CMCSA, CTXS, HURN, ILMN, JBLU, JNS, NUVA, TWTR, WNC, and XRS on Tuesday; CSV, ECHO, EEFT, ESRT, EXR, HOLX, INFN, LH, LRCX, MDCO, MOH, NOW, QDEL, QTM, SFLY, TTMI, XLNX for Wednesday; ACOR, ALI, ARIA, AVHI, BMY, CAA, CATM, CPHD, CY, GNC, GTLS, HLS, IART, INVN, KAMN, LYV, MTH, N, NXPI, ROVI, RPM, SFE, SPNC, STNG, TFX, VRSN, WFT, WCC, WLL, WDC on Thursday; and FOR and SWC on Friday.
Enjoy your weekend!
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