Morning Commentary: Holidays continue to pressure convertible bond market activity; Forestar stalls

By Stephanie N. Rotondo

Seattle, April 17 – The convertible bond market had not yet recovered from the long Easter weekend, according to one market source, as the Passover holiday continued to keep some players from their desks.

One New York-based sellside source pointed out that only $36 million of convertible bonds had traded as of mid-morning.

Not even an all-cash merger deal could get investors to pounce on Forestar Group Inc., the sellsider said.

He noted that the 3.75% convertible notes due 2020 “were at par before [the news] and they were at par after.”

The underlying equity (NYSE: FOR), however, was trying to gain ground, adding a nickel in early dealings to $14.20.

The merger with Starwood Capital Group was announced on Wednesday. Starwood will pay $14.25 per share in cash for all outstanding Forestar stock, totaling $605 million.

The price per share represents an 8.2% premium over the company’s 90-day volume weighted average price.

The buyout came on the heels of a restructuring effort that saw Forestar reducing costs and debt, as well as exiting non-core businesses to focus on core assets.

The deal is expected to close in the third quarter of 2017. Because of the combination, Forestar will not announce first-quarter earnings.

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