Great Plains’ new mandatory convertible preferreds in focus; DTE Energy deal on tap

By Stephanie N. Rotondo

Seattle, Sept. 28 – All eyes were on Great Plains Energy Inc.’s $750 million offering of 7% $50-par series B mandatory convertible preferred stock in convertible trading on Wednesday.

The deal came overnight with a 20% initial conversion premium and at the tight end of the 7% to 7.5% talk.

“It’s probably the most active name,” one trader said, pegging the issue at $50.80 at mid-morning.

Another trader said the issue was up to “$51-ish.”

“Part of that is the stock coming back,” he said.

The common shares traded up 68 cents, or 2.5%, to $27.84. That compared to opening levels of $26.88.

A trader also commented that while there has been “a little bit of weakness” in the mandatory convertible space of late, “people are generally constructive” on the new issue.

Great Plains also raised $1.4 billion via a concurrent offering of 52.6 million shares of common stock.

The proceeds of both offerings will be used to finance a portion of the cash consideration for the company’s previously announced acquisition of Westar Energy Inc.

Goldman Sachs & Co. is lead bookrunning manager of the concurrent offerings. Barclays and Wells Fargo Securities LLC are the joint bookrunners on the preferred offering.

The convertible preferreds are mandatorily convertible on Sept. 15, 2019.

Should the aforementioned merger fail to go through, or if it should not be completed by 5 p.m. ET on Nov. 30, 2017, the preferreds will be redeemed in full at par plus a make-whole amount within 10 business days.

The preferreds are convertible at a threshold appreciation price of $31.74.

Goldman Sachs BDC Inc. also priced a deal overnight, selling $100 million of convertible senior notes due 2022 at par to yield 4.5%.

The notes have an initial conversion premium of 10%.

However, a trader said there were little goings-on in that deal.

Pricing Wednesday, Indra Sistemas SA brought €250 million of 1.25% seven year convertible bonds with a 25% conversion premium, the Spanish information technology and defense systems company said in a press release.

Price talk was 0.5% to 1.25%, with a conversion premium of 25% to 30%.

There is a €50 million greenshoe. BNP Paribas and Citigroup Global Markets Ltd. acted as joint bookunners.

The initial conversion price is €14.629, a 25% premium over the volume weighted average price of the common shares traded on the Madrid Exchange.

The company can redeem the issue prior to maturity upon reaching a threshold price of €130,000, or if 15% of the principal amount of the bonds is left outstanding. Bondholders can request the debt be repurchased up to the fifth anniversary date.

Proceeds from the offering will be used to finance a €95 million repurchase of 1.75% senior unsecured convertible bonds due 2018. That amount represents about 38% of the outstanding principal amount.

One deal did get added to the calendar as well: DTE Energy Co. said it was selling $600 million of equity units.

The $50-par units will hold a contract to purchase common stock and a 1/20th, or 5%, undivided beneficial ownership interest in a $1,000-par remarketable senior note.

Proceeds will be used for the purchase of midstream natural gas assets.

Wells Fargo, Citigroup and J.P. Morgan Securities LLC are running the books.

SolarCity pushes higher

Away from new issues, SolarCity Corp.’s convertible bonds – the 1.625% convertible notes due 2019 and the 2.75% convertible notes due 2018 – were “active,” according to a trader.

The trader noted that the name doesn’t tend to be overly busy but that the debt was moving up on news that the company’s Mexican unit would invest about $1 billion into the industry over the next five years.

The news was “doing well for that credit,” the trader said.

The 2.75% convertible notes due 2018 traded up to an 80 to 81 context, a gain of 3 points on the day.

As for the stock underlying the equity, it was up 49 cents, or 2.45%, at $20.48.

The plan, however, depends upon Mexico holding current net-metering levels.

Net-metering is an industry incentive that requires utilities to buy surplus power generated by rooftop solar panels. Capacity is currently capped at 500 kilowatts, but there is concern that, due to public finance concerns, it could be pushed to 50 kilowatts.

Mentioned in this article:

DTE Energy Co. NYSE: DTE

Goldman Sachs BDC Inc. NYSE: GSBD

Great Plain Energy Inc. NYSE: GXP

SolarCity Corp. Nasdaq: SCTY

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