The Week That Was

New issuance was light this week, with no convertible bond deals announced, but we did see one large mandatory issue.  Southwestern Energy issued $1.5 billion (upsized from $1.3 billion) of mandatory convertible preferred stock together with $600 million of common equity.  The company plans to use the proceeds to pay down a portion of a $4.5 billion one year unsecured bridge loan, which was used for the acquisition of natural gas leases in December.  SWN is an oil and natural gas exploration and production company primarily operating in the Fayetteville (Arkansas) and Marcellus (Northeast Pennsylvania) shale reservoirs.  Nearly all revenue is from natural gas, with less than 1% coming from oil.  With the demand / supply relationship more in-balance for natural gas than oil, the stock looks attractive at 10 times 2014 consensus EPS and we expect it do well once oil reaches a bottom.  As we said earlier in the week, the pricing on the mandatory looks attractive and is reasonable for such a large deal.                  

Earnings news remains very light, but we know it will be picking up soon enough.  We saw announcements from two convertible companies this week.  KB Home announced results on Tuesday, missing on EPS but beating consensus revenue estimates.  Intel Corp (INTC) announced fourth quarter results Thursday, beating both EPS and revenue consensus estimates.  However first quarter revenue guidance was light. 

In other news this week,  Air Lease (AL) announced it would deliver eight new Boeing 777-300ER aircraft to six different airlines in 2015........  SunEdison (SUNE) announced the signing of a memorandum of understanding with Adani Enterprises to establish a joint venture to build the largest vertically integrated solar photovoltaic manufacturing facility in India with an investment of up to $4 billion.........  Alpha Natural Resources (ANR) announced President Paul Vining is resigning effective January 31, 2015 to take a position with Cline Group.........  Broadsoft (BSFT) announced the acquisition of Leonid Systems a leading hosted Voice over Internet Protocol OSS provider.  The acquisition is expected to enhance Unified Communications (UC) service management.........  ISIS Pharmaceuticals (ISIS) announced receiving a $7 million milestone payment from Biogen Idec relating to its ISIS SMN RX study in children with spinal muscular atrophy.........  Kaiser Aluminum (KALU) announced a 14% increase in its quarterly dividend to $0.40 per share payable on February 13, 2015.........  Mentor Graphics (MENT) announced the acquisition of Flexras Technologies, a developer of proprietary technologies that reduce time required for prototyping, validation, and debugging of integrated circuits and systems on a chip.  No terms were disclosed.........  Sandisk (SNDK) provided preliminary fourth quarter 2014 revenue results which were lower than previous forecasts.........  Depomed (DEPO) announced a deal to acquire the US rights to the NUCYNTA franchise (pain) from Janssen Pharmaceuticals (a subsidiary of J&J) for $1.05 billion.  Depomed plans to raise capital through a combination of debt, equity, and equity-linked financing prior to a second quarter 2015 closing.       

Companies announcing earnings for the upcoming week include: Sandisk for Wednesday and Infinera for Thursday.