Joint leads Credit Suisse First Boston and ING accelerated pricing of a $125 million convertible for Hannstar Display last night (Tuesday) and increased the deal by 20% on the back of strong demand. At $150 million, books closed two-and-a-half times covered with participation from 96 investors. There is also a $20 million greenshoe.
Pricing came towards the lower end of the range with a 10% conversion premium to a spot close of NT$11.72 , compared to a pre-marketed range of 9% to 14%. The deal has a zero coupon, zero yield par redemption structure with a call option after two years subject to a 125% hurdle and annual puts at par. There are also two re-sets. The first is an annual re-fix with an 80% floor and the second is a special re-fix option at the discretion of the company prior to each put date. This will be either the higher of 90.1% of the market price or 80% of par value.
Based on a credit spread of 375bp over libor, the deal has a bond floor of 94.86%, theoretical value of 110.54% and implied volatility of 12.69%. This is based on a 35% volatility assumption, zero dividend yield and 6% cost of borrow. Historic volatility (100 days) stands at 60%.
After a couple of weeks intensive credit marketing, the deal was said to have attracted heavy asset swap demand covering roughly two thirds of the book. Although an implied BB-/B+ credit, Hannstar benefits from its links to the Winbond and Walsin Lihwa groups and domestic banks are consequently said to have found the level attractive relative to the 250bp paid by Quanta Display a few weeks ago. However, since the company wants to keep its domestic credit lines as free as possible, only about a third of the asset-swap book was actually allocated.
By geography, the book had a breakdown which saw 40% go to Europe, 27% to offshore accounts, 25% to Asia and 8% to the US.
At the end of Asia's trading day, the deal was said to have traded up to a high of 100.5% to 101%. On full conversion it will represent 13% of Hannstar's enlarged share capital. Alongside the leads, Fubon and Yuanta were co-managers.