08-01-14 Qihoo (QIHU)

$900m (+135m) sen unsec cb coming tomorrow from CS/CITI.

Terms:  <A> >$300m, 6y, ¼-¾% up 35-40%, 3y put <B> >$300m, 7y, 1½-2% up 32½-37½%, 5y put,full pctn.

UOP=gcp.$12bn internet security biz w/stk +35% since 1st CB came 08/13 ($600m, 2½% up 40% w/stk @ 79.26). These are -1.5pts > announcement & now back out L+420 (40vol) for 2.1yrs. PFcash=1.8bn, debt=1.5bn (all cb), LTMebitda =190m, fcf=205m, g/lev=7.9x.

Credit +ve 4 existing we’d assume  L+350 for 2.1y, L+400 for <A> (3y) & L+500 for <B> (5y). ADV=3m, 01/16 same strike calls ~45iv, 1y 100/200d=54/57%, despite an  argument against, we’ll assume flat term structure & 40%.

Theo= <A>103.5/105.2/106.9 <B>104.3/106.5/108.6.Poss o/r rotation from old 2 new (expect <A> outperformance). Add Index & these are good


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