Daiwa new issue color (5/4/11)
$525m (+75m) 144a sen cb pricing tonight from JPM/BOA. Terms: 30yr, 2.5-3% up 15-20%, soft call yr 10@150% Happy meal: up to $400m used to buy back stock. Last week NVLS gave disappointing guidance & stk got hit. They’ve now upsized previous shs buyback by $600m. This is a breakeven trade: b/e = 5.5 yrs vs VRSN in 5.25 vs VSH in 5 yrs & BGC in 4.95 yrs. VRSN crosses par as 3.25 up 24%, VSH 2.25 up 15%, & BGC 4.5 up 33%. For model’s sake, we’ll use L+500 and 25v, theo = 104.5. Richer than its b/e peers but is first large deal in a while on a decent credit. O/R wont love the 90 delta unless they have high conviction but there’ll be hedge demand. Nothing novel about this, push for mids.
PF Cash $750m
PF Debt $637m
LTM EBITDA $402m
LTM FCF $337m
Leverage 1.6x
Mkt Cap $2.761
NVLS had a steep fall-off in sales & EBITDA in 08 nad 09 but experienced strong recovery since. Co. is strong consistent FCF generator, even during downturn. Near term guidance has disappointed due to order push outs, but expected to come back in 2H11. Non-convert debt is secured bank debt, matures 6/12. Fully drawn, but some s/t facilities available. Liquidity strong with significant cash. Using FCF to buy back stock w/$273m done FY10 & 200m 1Q11 & $400m of conv deal.
Our assigned spread L+500