Morning Commentary: Rayonier brings upsized sale of convertible preferreds; Priceline on the rise

By Stephanie N. Rotondo

Seattle, Aug. 5 – The convertible bond market was treated to a new issue early Friday as Rayonier Advanced Materials Inc. priced $150 million of 8% series A mandatory convertible preferred stock.

The deal was upsized from $125 million. There is a $22.5 million over-allotment option.

Upon pricing, a trader said the preferreds traded “above issue price” of par but that they were “coming in with the common stock,” so that by mid-morning, they were in a 99 to 99.5 context.

The common stock (NYSE: RYAM) was off 26 cents, or 1.98%, to $12.67.

The issue will list on the New York Stock Exchange under the ticker “RYAMPA.”

Meanwhile, Priceline Group Inc.’s convertibles were making up the bulk of the day’s activity, as the market reacted to the company’s better-than-expected earnings release.

The release came late Thursday.

A trader said the 1% convertible notes due 2018 were trading between 154.75 and 155, while the 0.9% convertible notes due 2021 were at 105.375.

“It looks like somebody is doing a swap, buying the 0.9s and selling the 1s,” he said. “They are buying duration.”

The equity (Nasdaq: PCLN) was also on the rise, gaining $65.72, or 4.83%, by mid-morning to trade at $1,425.71.

In other earnings movers, Encore Capital Group Inc.’s 2.875% convertible notes due 2021 were trading down outright at 68.25, according to a trader.

The 3% convertible notes due 2017 were meantime at 96 versus a stock price of $21.75.

“That’s kind of crazy, because it’s next year’s maturity,” he said. “Those really do move on swap; it’s really more of an equity play.”

As for the equity, it was down as much as 15% in early trading – despite the fact that the company’s earnings beat expectations.

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