Morning Commentary: iStar’s new convertible issue breaks, trades above par in active dealings

By Stephanie N. Rotondo

Seattle, Sept. 15 – iStar Inc.’s $250 million of 3.125% convertible notes due 2022 broke for trading early Friday, and the deal was already making up the bulk of trading.

A trader said $51 million of the bonds had traded as of mid-morning, which was “half the volume.”

He pegged the paper in a 100.26 to 100.75 context.

The company’s stock (NYSE: STAR), however, was trending down a little, falling 17 cents, or 1.48%, to $11.34.

The Rule 144A offering came late Thursday via Barclays, BofA Merrill Lynch and J.P. Morgan Securities LLC.

The initial conversion premium is 35%.

Pricing was in the middle of the 2.75% to 3.25% yield talk and the 32.5% to 37.5% premium talk.

There is a $37.5 million over-allotment option.

Conversions will be settled in common stock at an initial conversion rate of 64.3563 shares per each $1,000 of notes. That equals an initial conversion price of $15.54 a share.

The convertibles sale is being done concurrently with an $800 million offering of senior unsecured notes due 2020 and 2022. Proceeds from both deals will be used, along with cash on hand, to redeem and repay about $1.4 billion in debt securities. The company will also use $46 million to repurchase 4 million shares of common stock via privately negotiated transactions with purchasers of the new convertibles.

iStar is a New York-based real estate investment trust.

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