Apollo, Hannon Armstrong plan new issues; Transocean eyed; Redwood at par post-pricing

By Stephanie N. Rotondo

Seattle, Aug. 15 – The convertible market’s new issue calendar continued to build up on Tuesday.

Early in the day, Apollo Commercial Real Estate Finance Inc. said it planned to offer $200 million of five-year convertible senior notes.

Price talk is for a 4.25% to 4.75% yield and an initial conversion premium of 10% to 15%, according to a market source.

The deal was expected to price after Tuesday’s close, though no details were available as of 6 p.m. ET.

Ahead of pricing, Apollo’s shares were down 13 cents to $18.10.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, Citigroup Global Markets Inc. and JPMorgan are the joint bookrunners.

After the market closed, Hannon Armstrong Sustainable Infrastructure Capital Inc. announced a $135 million offering of five-year convertible senior notes.

Price talk is for a 3.625% to 4.125% yield and an initial conversion premium of 20% to 25%, a market source reported.

An investor call is scheduled for Wednesday at 11 a.m. ET. Pricing is expected after the midweek session closes.

Prior to the deal’s announcement, the company’s stock was trading at $24.11, which was unchanged from Monday’s levels.

Deutsche Bank Securities Inc., BofA Merrill Lynch and J.P. Morgan Securities LLC are the joint bookruners. Nomura Securities and Oppenheimer & Co. are the co-managers.

There could be yet another deal preparing to hit the market, though it was not officially announced.

Transocean Ltd. on Tuesday said it was acquiring Songa Offshore SE for $3.38 billion, including the assumption of debt. Transocean will conduct a voluntary exchange offer as part of the deal. It is expected that the acquisition will be funded with $480 million in cash, $540 million in equity and $660 million in convertible debt.

The deal is “supposed to be accretive” to earnings, a trader said.

The company’s stock fell on the takeover news, declining 48 cents, or 5.72%, to $7.91.

The acquisition is expected to close in the fourth quarter.

Deals announced Monday were meantime getting priced.

Redwood Trust Inc. said it sold $225 million of 4.75% convertible senior notes due 2023 with an initial conversion premium of 12.5%.

The yield came at the cheap end of the 4.25% to 4.75% talk, while the conversion premium was in the middle of the 10% to 15% talk.

A market source saw the deal trading at par.

In the wake of the new issue, Redwood’s stock was initially lower, but managed to finish the day up 8 cents at $16.59.

JPMorgan and Wells Fargo Securities LLC ran the books.

Conversions will be settled in common stock. The initial conversion rate is 53.8394 shares per each $1,000 of notes, equal to an initial conversion price of $18.57 a share.

The notes are convertible at any time. The paper is also putable upon a fundamental change.

The convertibles are non-callable for life.

Meanwhile, Great Ajax Corp. priced a $20.5 million add-on to its 7.25% $25-par convertible senior notes due 2024 (NYSE: AJXA) at $25.70, equal to a 102.8% premium to par.

The convertible notes ended the day at $25.98, off 6 cents.

The underlying equity was off 11 cents, at $14.37.

Including the initial offering, this brings the total amount currently outstanding to $108 million.

The company initially sold $76.25 million of the notes on April 20. On April 25, the company said its $11.25 million over-allotment option had ben exercised.

The issue came with an initial conversion premium of 17.5%. At current levels, the conversion premium is 17.3%.

Raymond James & Associates Inc. and JMP Securities LLC are the bookrunners.

Apollo Commercial Real Estate Finance Inc. NYSE: ARI

Great Ajax Corp. NYSE: AJX

Hannon Armstrong Sustainable Infrastructure Capital Inc. NYSE: HASI

Redwood Trust Inc. NYSE: RWT

Transocean Ltd. NYSE: RIG

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