American Realty bonds add a point with shares lower; market quiet ahead of holiday

By Rebecca Melvin

New York, Dec. 24 – American Realty Capital Properties Inc.’s 3% convertibles changed hands a point higher on Wednesday despite lower shares after the New York-based real estate investment company provided a business update, including news that it has received a waiver from lenders that reduces its maximum credit facility debt.

The company said that under a new agreement with lenders its maximum debt under its current credit facility is reduced to $3.6 billion. It also said that it has received an extension for reporting third- and fourth-quarter results in light of recent accounting irregularities.

The company has also agreed not to pay a dividend to shareholders until it can report quarterly results. It plans to pay a dividend that is in line with peers.

Otherwise U.S. convertibles were quiet Wednesday with ranks of market players thinned ahead of the Christmas holiday. Those still at their desks mostly watched stocks and did housekeeping.

The financial markets closed early Wednesday ahead of Christmas Eve and will remain closed on Thursday for Christmas.

Even though markets will reopen on Friday, the year is done for many market players, with little to no activity expected in either the primary or secondary convertibles markets before the New Year.

“There’s absolutely zero,” a New York-based trader said about market action Wednesday morning.

With a few exceptions, the market was mostly quiet for the week through Wednesday.

On Monday and Tuesday, Gilead Sciences Inc.’s convertibles dropped on an outright basis in tandem with the underlying shares of the Foster City, Calif.-based biopharmaceutical giant, but they remained flat on a dollar-neutral, or hedged, basis.

Busy primary eyed for January

No further deals in the primary market are expected until January, several market sources said. At that point, though, the market is expected to resume at robust levels, the sources said.

One trader said that new issues were put off from earlier this month, when a sharp sell-off hit the financial markets and discouraged would-be issuers.

Those deals, he said, would come down the chute promptly in January.

A second trader said that he didn’t think the deals were influenced by the market pullback, but he does see a good pipeline, and come January he thinks new issuance will pick up as rates start ticking back up and because of leeriness surrounding the high-yield market.

The high-yield market has seen spreads widen amid concern regarding how depressed oil markets will affect high-yield energy names and the asset class overall.

“I think convertibles will be the beneficiary of those trends,” the trader said.

Total new issue volume for 2014 was $51.3 billion in 140 deals as of Dec. 23, which just edged 2013’s total $49.3 billion in 157 deals, for a 4% increase, according to data compiled by Prospect News.

American Realty adds a point

American Realty’s 3% convertibles due 2018 traded at 89.125, which was up a point, a New York-based trader said.

Shares of the REIT were down nearly 4% to $8.00 at their lows. But they clawed back up to close unchanged at $8.33.

“ARCP has news out, and the stock is down but the bonds are holding in,” a New York-based trader said Wednesday morning.

The company outlined business developments in a news release, including details of a waiver to postpone reporting quarterly reports until March 2.

It has agreed to reduce permanently its maximum amount of debt under its credit facility to $3.6 billion, including the elimination of the $25 million swingline facility.

Currently the company has about $3.2 billion outstanding under its credit facility and more than $250 million of cash on hand.

In addition, American Realty has agreed that it will not pay dividends until it has delivered its 2013 financial statements, 2014 financial statements and related compliance certificates.

Mentioned in this article:

American Realty Capital Properties Inc. Nasdaq: ARCP

Gilead Sciences Inc. Nasdaq: GILD

© 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.