Premier Image secures tight terms

ING Barings has priced an $85 million convertible for the digital camera manufacturer at the mid-point of an aggressive range.
Pricing was completed in London last night (Thursday), with the coupon coming in at 0%, the conversion premium at 14.5% over an NT$47.2 close and the three-year put at 118.06%, representing a spread of 150bp over Treasuries and yield-to-put of 5.69%.

At these levels, the coupon came at the tightest end of its 0% to 0.75% range, the conversion premium in the middle of a 12% to 17% range and the put option at the outer end of a 75bp to 150bp range. There is also three-year hard no call, thereafter subject to a 140% trigger and re-sets in years one, two and three, subject to an 80% floor. Redemption for the five-year deal is at par.

Alongside the lead, National Securies was co-lead, with CLSA, Daiwa and Salomon Smith Barney as co-managers.

Underlying assumptions comprise a bond floor of 93.3% based on a credit spread of 300bp over Libor. Theoretical value comes out at 108.3% with implied volatility of 19% based on stock borrow of 6% and volatility of 35%.

About 44 investors are said to have participated, with three accounts placing orders for more than 10% of the transaction. By geography, the book is said to have split 50% Europe and 25% each Asia and the US. By investor type, outright funds are said to have predominated, taking about 70%, with asset swapper on 22% and equity funds 8%.

"What this deal shows is that investors are very sensitive about credit downside protection," comments one banker. "But they don't seem quite so bothered about running yield and it didn't prove necessary to include a coupon."

Some bankers had initially thought terms aggressive because of the long put and tight credit spread. At three years, Premier's put option is the longest to hit the Taiwanese market for well over a year and was designed to meet investors' desire for additional time value.

Where the credit spread is concerned, bankers say that they had always been confident because of the company's low gearing and early indications of asset swap interest.

Premier also announced yesterday that August's sales figures hit a new record high. The digital camera manufacturer said it recorded sales of NT$1.223 billion, a 20% increase over July, which also represented a record month.

Within an hour of pricing, the deal was said to be trading up at 100/100.5 in the face of an overall market trading slightly off. The stock closed the day down 2% in line with the overall Taiwanese market. Year-to-date, it is still up 56.46%.


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