Morning Commentary: Cheesecake Factory on deck; Clarivate, WisdomTree hit aftermarket

By Abigail W. Adams

Portland, Me., June 10 – The convertibles primary and secondary markets remained active on Thursday with one new offering on deck and two deals totaling $1.4 billion making their aftermarket debut.

The Cheesecake Factory Inc. plans to sell $300 million of five-year convertible notes after the market close on Thursday.

The new deal looked cheap although some sources questioned the vol. assumption used by underwriters.

Meanwhile, $1.4 billion of new paper entered the secondary space.

Clarivate plc priced $1.25 billion of three-year par-of-$100 series A mandatory convertible preferred stock and WisdomTree Investments Inc. priced $150 million of five-year convertible notes after the market close on Wednesday.

Clarivate’s mandatory convertible preferreds were flat on an outright basis but performing well for hedge players based on where stock was sold.

Cheesecake on deck

The Cheesecake Factory plans to sell $300 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

The deal was heard to be in the market with assumptions of 375 basis points over Libor and a 40% vol.

Using those assumptions, the deal looked 3.45 points cheap at the midpoint of talk, a source said.

However, a 40% vol. seemed aggressive for the stock, a source said.

Concurrently, the company plans to price a secondary offering of $175 million in common stock.

Proceeds will be used to repurchase 150,000 shares of its series A convertible preferred stock for $447 million in cash.

Holders of the remaining 50,000 outstanding shares of the convertible preferred stock will convert them into common stock and receive $10.4 million in cash.

Clarivate eyed

Clarivate priced $1.25 billion of three-year par-of-$100 series A mandatory convertible preferred stock after the market close on Wednesday at par with a dividend of 5.25% and a threshold appreciation premium of 20%.

Pricing came at the cheap end of talk for a dividend of 4.75% to 5.25% and at the midpoint of talk for a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

Concurrently, the company priced a secondary offering of $1 billion, or 38,461,538 shares at a public offering price of $26.00.

Approximately $750 million, or 28,846,154 shares, were offered by the company and $250 million, or 9,615,384 shares, were offered by existing shareholders.

The mandatory convertible preferreds were flat on an outright basis.

They were changing hands at par versus a stock price of $26.00.

However, some hedge players active in the name sold stock at a much higher price.

“It’s doing well for swap guys,” a source said.

WisdomTree at the mids

WisdomTree priced $150 million of five-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 3.25% and an initial conversion premium of 60%.

Price talk was for a coupon of 3% to 3.5% and an initial conversion premium of 57.5% to 62.5%, according to a market source.

While volume in the name was light, the notes were performing well on an outright basis.

They were changing hands in the 100.75 to 101.25 context early in the session.

WisdomTree’s stock was $7.11, an increase of 3.04%, shortly before 11 a.m. ET.

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