Morning Commentary: Fluor convertible preferreds, Braemar Hotels convertibles price

By Abigail W. Adams

Portland, Me., May 14 – The convertibles primary market saw a relatively active week despite the turbulence in equities.

Two new deals totaling $600 million priced after the market close on Thursday bringing the weekly tally to $2.4 billion, which priced over six deals.

Fluor Corp. priced an upsized offering of $525 million, or 525,000 shares, of par-of-$1,000 convertible perpetual preferred stock, and Braemar Hotels & Resorts, Inc. priced an upsized $75 million of five-year convertible notes.

Fluor upsizes

Fluor sold an upsized offering of $525 million, or 525,000 shares, of par-of-$1,000 convertible perpetual preferred stock after the market close on Thursday with a 6.5% dividend and an initial conversion premium of 17.5%.

The deal priced at the cheap end of talk for a dividend of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The greenshoe was also upsized to $75 million. The initial size of the offering was $450 million with a greenshoe of $67.5 million.

There was a debate about whether the offering should be considered a mandatory convertible preferred or was a rare instance of an actual convertible preferred, due to the deal’s unique call structure.

The preferred stock has one year of hard call protection and is then provisionally callable for three years subject to a 130% hurdle.

While some considered the deal a new kind of mandatory, due to the call structure, others saw it as convertible preferred with a soft call for three years.

Real mandatories have an upper and lower strike price, a source said. However, Fluor’s new offering only has one, a source said.

Braemar prices

Braemar Hotels & Resorts priced an upsized $75 million of five-year convertible notes after the market close on Thursday at par with a coupon of 4.5% and an initial conversion premium of 25%, according to a company news release.

Pricing came at the cheap end of talk for a coupon of 4% to 4.5% and at the midpoint of talk for an initial conversion premium of 22.5% to 27.5%, according to a market source.

The new paper was not seen on Trace early in the session.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.