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Morning Commentary: Plug Power, Blackstone, Accelerate Diagnostics convertibles on tap
By Abigail W. Adams
Portland, Me., March 22 – With the Federal Reserve interest rate hike announced, the convertibles primary market has been busy preparing new paper. Three new deals totaling $470 million are expected to price after the market close on Thursday.
Plug Power Inc. plans to price $100 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 5% to 5.5% and an initial conversion premium of 20% to 25%, according to a market source.
Accelerate Diagnostics Inc. plans to price $150 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 2% to 2.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.
Plug Power and Accelerate Diagnostics both will enter into prepaid forward purchase transactions in connection with the convertible notes offering.
“They both have borrow facilities. We haven’t seen those in a while,” a market source said. “That’s interesting.”
The forward purchase transactions are to accommodate convertible arbitrageurs who otherwise would not be able to participate in the deal. “There’s not enough borrow to short the stock,” the source said.
The deal from Accelerate Diagnostics is expected to do well. “It’s a real business with a real market cap,” a market source said.
However, Plug Power “will be challenging,” a market source said. “It’s a difficult business. It will be interesting to see how investors respond.”
The issuer is a Latham, N.Y.-based designer and manufacturer of hydrogen fuel cell systems.
Blackstone Mortgage Trust Inc. also plans to price $220 million of five-year convertible notes after the market close on Thursday.
The offering carries a fixed coupon of 4.75% and an initial conversion premium of 15% with price talk for an issue price of 99 to 99.5.
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