Algonquin Power on tap; Cracker Barrel, Vroom expand on debut; DraftKings improves

By Abigail W. Adams

Portland, Me., June 16 – The convertibles primary market remained active on Wednesday with one new deal on deck after pricing two deals post-close on Tuesday.

Algonquin Power & Utilities Corp. plans to price $900 million of three-year par-of-$50 equity units after the market close on Thursday with price talk for a coupon of 7.375% to 7.875% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

J.P. Morgan Securities LLC (lead left), BMO Capital Markets Corp., Wells Fargo Securities LLC, Morgan Stanley & Co. LLC and BofA Securities Inc. are joint bookrunners for the registered offering, which carries a greenshoe of $135 million.

The secondary space was also active as new paper from Cracker Barrel Old Country Store Inc. and Vroom Inc. made their aftermarket debuts.

There was $787 million in reported volume heading into the market close with the new paper accounting for the majority of activity in the secondary space.

Both deals were performing well on an outright and dollar-neutral basis despite a choppy day for equities.

While equity benchmarks wavered between gains and losses as the market digested the latest announcement from the Federal Reserve, there were no dramatic swings in either direction.

Federal Reserve chairman Jerome Powell “struck the right tone” with few surprises from the press conference, a market source said.

Outside of the new paper, the secondary space was quiet with few names seeing concentrated trading activity.

DraftKings Inc.’s 0% convertible notes due 2028 remained active with the notes improving after a large contraction the previous session caused by a short-seller report.

Vroom in focus

Vroom priced an upsized $550 million of five-year convertible notes after the market close on Tuesday at par at the rich end of talk with a coupon of 0.75% and an initial conversion premium of 40%.

Price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 35% to 40%, according to a market source.

The initial size of the offering was $500 million.

The new paper was in focus in the secondary space with more than $150 million in reported volume heading into the market close.

While Vroom’s offering was heard to be heavily oversubscribed, the notes initially struggled out of the gate. They briefly dipped below par with stock off early in the session.

However, the notes rallied alongside stock as the session progressed.

They were marked at 100.5 bid, 101 offered about one hour into the session with good buying activity around the par to 100.5 level, a source said.

The notes jumped to 102.25 in the late afternoon as stock roared into the close.

The notes were volatile on hedge and initially pushed out about 2.5 points dollar-neutral with stock off early in the session.

However, they gave back much of their dollar-neutral gains as stock rallied into the afternoon.

One source saw them up 0.5 point dollar-neutral in the late afternoon. Another source saw them expanded by 1 point dollar-neutral at the market close.

Vroom’s stock traded down to $38.66 after the opening bell. It traded as high as $41.25 before closing the day at $41.16, an increase of 2.87%.

Cracker Barrel gains

Cracker Barrel priced $275 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 0.625% and an initial conversion premium of 25%, according to a company news release.

Pricing came at the midpoint of talk for a coupon of 0.375% to 0.875% and at the cheap end of talk for an initial conversion premium of 25% to 30%, according to a market source.

The deal was the latest offering to come as a “happy meal” with $35 million of net proceeds used to repurchase 232,543 shares of common stock.

The notes were performing well on an outright and dollar-neutral basis.

They were marked at 100.625 bid, 101.125 offered with stock unchanged early in the session.

They remained wrapped around 101 heading into the afternoon.

The notes were seen expanded 0.75 point to 1 point dollar-neutral, sources said.

There was $80 million in reported volume during Wednesday’s session.

Cracker Barrel’s stock traded to a low of $149.61 and a high of $152.26 before closing the day at $151.63, an increase of 0.74%.

DraftKings rebounds

DraftKings’ 0% convertible notes due 2028 rebounded in active trading on Wednesday after a large dollar-neutral contraction the previous session.

The 0% notes continued to trade around 88 on an outright basis.

However, they expanded about 0.5 point dollar-neutral, sources said.

DraftKings’ stock traded as high as $50.13 and as low as $47.49 before closing the day at $48.81, an increase of 0.62%.

While the 0% notes pared their losses on Wednesday, they remained contracted by about 1 point since Tuesday when a short-seller report drove down the online gaming company’s stock and convertible notes.

DraftKings’ 0% convertible notes contracted 1.5 points on Tuesday after Hindenburg Research alleged the company derived some of its revenue from illicit activity.

Mentioned in this article:

Algonquin Power & Utilities Corp. NYSE: AQN

Cracker Barrel Old Country Store Inc. Nasdaq: CBRL

DraftKings Inc. Nasdaq: DKNG

Vroom Inc. Nasdaq: VRM

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