Lithium Americas convertibles on tap; Array eyed; First Majestic notes expand on debut

By Abigail W. Adams

Portland, Me., Nov. 30 – New convertible paper was in focus on Tuesday with one deal slated to price after the market close, one deal on deck for Wednesday and another making its aftermarket debut.

Lithium Americas Corp. plans to price $225 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 30% to 35%, according to a market source.

Deutsche Bank Securities Inc. is lead left bookrunner for the Rule 144A and Regulation S offering, which carries a greenshoe of $33.75 million.

Array Technologies Inc. plans to price $325 million of seven-year convertible notes after the market close on Tuesday.

The deal looked cheap based on underwriters’ assumptions and was heard to be well oversubscribed during bookbuilding.

However, the longer dated maturity was seen as a drawback.

As market players eyed the deals in the pipeline, new paper form First Majestic Silver Corp. made its aftermarket debut.

The new paper was in focus in the aftermarket and performing well despite another brutal day for equities following some hawkish comments from Federal Reserve chairman Jerome Powell.

There was more bloodletting on the Street after Powell warned that bond tapering would come sooner than anticipated and there would be an end to the use of the word “transitory” to describe inflation.

The Dow Jones industrial average closed the day down 652 points, or 1.86%, the S&P 500 index closed down 1.9%, the Nasdaq Composite closed down 1.55% and the Russell 2000 index closed down 1.92%.

However, the convertible secondary market was holding up relatively well on a dollar-neutral basis.

“There’s no panic yet,” a source said. “The market is taking it in stride.” However, that may change if the selling continues.

While the travel sector got hit on Black Friday with airlines, in particular, contracting about 1 point dollar-neutral, they have remained there since.

NCL Corp. Ltd.’s recently priced 1.125% exchangeable notes due 2027 remained active and continued to move lower on an outright basis.

However, the notes were largely moving in line dollar-neutral, a source said.

Array Technologies eyed

Array Technologies plans to price $325 million of seven-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 450 basis points over Libor and a 42% vol., according to a market source.

Using those assumptions, the deal looked 1.63 points cheap at the midpoint of talk.

Another source saw the deal about 3 points cheap at the midpoint of talk.

The offering was heard to be multiple times oversubscribed with an upsize possible, a source said.

While the deal was in demand during bookbuilding, the longer duration of the notes was a drawback.

First Majestic expands

First Majestic priced $200 million of five-year convertible notes after the market close on Monday at par at the midpoint of talk with a coupon of 0.375% and an initial conversion premium of 35%.

Price talk was for a coupon of 0.125% to 0.625% and an initial conversion premium of 32.5% to 37.5%, according to a market source.

Approximately $125.2 million of net proceeds will be used to repurchase the company’s 1.875% convertible notes due 2023 in privately negotiated transactions.

The remaining 1.875% notes will be called.

The new 0.375% notes were performing well on their aftermarket debut.

The notes were changing hands between 102 and 102.5 about one hour into the session. However, the notes gave back their outright gains as the session progressed and were seen changing hands around par in the late afternoon.

However, the notes expanded about 1.5 points dollar-neutral, a source said.

First Majestic’s stock traded to a high of $12.66 and a low of $11.64 before closing the day at $11.92, a decrease of 2.85%.

NCL active

NCL’s recently priced 1.125% exchangeable notes due 2027 continued to trend lower on an outright basis on another brutal day for the company’s stock.

The 1.125% convertible notes were down about 2 points outright with stock off more than 3%.

They were wrapped around 91 in the late afternoon.

While down outright, the notes were moving in line dollar-neutral, a source said.

Norwegian Cruise’s stock traded to a high of $20.06 and a low of $18.84 before closing the day at $19.51, a decrease of 3.46%.

The notes have taken a beating over the past few sessions as stock tanked on renewed lockdowns caused by the Covid-19 variant.

The convertibles were on a 99-handle prior to the Black Friday sell-off.

While in line on Tuesday, the notes tumbled 8 points outright and contracted dollar-neutral last Friday.

Mentioned in this article:

Array Technologies Inc. Nasdaq: ARRY

First Majestic Silver Corp. NYSE: AG

Lithium Americas Corp. NYSE: LAC

NCL Corp. Ltd. NYSE: NCLH

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