Convertibles space ‘rocking and rolling’; primary prices $1.18 billion in new deals

By Abigail W. Adams

Portland, Me., May 10 – The convertibles space was “rocking and rolling” on Thursday with the primary market pricing a slew of new deals and exchanges, some of which saw heavy trading volume in the secondary space, market sources said.

After a long wait, AXA SA priced $750 million of three-year bonds mandatorily exchangeable for AXA Equitable Holdings, Inc. stock after the market close on Wednesday.

The bonds were two times oversubscribed during the subscription process and in hot demand in the secondary space, sources said.

Nabors Industries Ltd. priced $250 million, or 5 million shares, of three-year $50-par series A mandatory convertible preferred shares after the market close on Wednesday. The convertible preferred shares were up in heavy trading volume.

EZCorp Inc. priced an upsized $150 million of seven-year convertible notes prior to the market open on Thursday. While not as active in the secondary space, the bonds were heavily oversubscribed during the subscription process, a market source said.

In smaller offerings that priced prior to the market open on Thursday, Akoustis Technologies Inc. priced $15 million of five-year convertible notes with a coupon of 6.5% and an initial conversion premium of 10.5%.

Amedica Corp. priced $15 million, or 15,000 units consisting of one share of series B convertible preferred stock and warrants to purchase up to 758 shares of common stock.

Scorpio Tankers Inc. priced $175 million of 3% convertible notes due 2022 with an initial conversion premium of 36.25%, which it agreed to issue in exchange for $175 million of its 2.375% convertible notes.

The new 3% notes were active and also trading up in the secondary space, a market source said.

Of the new deals that priced, the mandatory convertibles dominated secondary trading activity with many in pursuit of the paper as the mandatory convertible portion of the convertibles universe shrinks.

“All in all, it was a good day,” a market source said.

AXA’s large capital raise

AXA priced $750 million of three-year bonds mandatorily exchangeable for AXA Equitable Holdings stock after the market close on Wednesday at the cheap end of talk with a coupon of 7.25% and an initial exchange premium of 17.5%, according to a market source.

Price talk had been for a coupon of 6.75% to 7.25% and an initial exchange premium of 17.5% to 22.5%.

The deal, which launched in late April, was a much longer bookbuilding process due to the concurrent pricing of Equitable Holdings’ IPO, a market source said.

Equitable Holdings priced $2,745,000,000, or 137.25 million shares, of common stock at $20.00 a share after the market close on Wednesday.

Pricing of the common shares was lower than the anticipated range of $24.00 to $27.00 per share.

While not as large as its initial target, Equitable Holdings’ IPO was the largest IPO of the year.

The IPO and the mandatorily exchangeable bonds “was a huge capital raise,” a market source said.

The pricing of the mandatory bonds fell on the cheap end of talk largely because of the size of the offering.

“It was the largest IPO year to date, and with the mandatory on top of it, it was a lot of capital to absorb,” a market source said. “The pricing was affected by the overall size.”

The mandatory bonds were popular, however, and were up to 2x oversubscribed, the source said.

While hedge players were interested in the offering, they were a minority in the books, with the deal heavily allocated to outright players, the source said.

AXA dominated trading activity in the secondary space with more than $69 million bonds traded by late afternoon, accounting for 21% of the total trading volume for convertible bonds on Thursday.

The mandatory bonds were seen at 101 early in the session and traded up to 104 in the afternoon with stock up, a market source said.

AXA’s common stock traded below its IPO price early in the session but steadily climbed throughout the afternoon. The common stock traded to a low of $19.50 and a high of $20.50 before closing Thursday at $20.34.

Nabors trades up

Nabors Industries priced $250 million, or 5 million shares, of three-year $50-par series A mandatory convertible preferred shares after the market close on Wednesday with a dividend of 6% and an initial conversion premium of 20%.

Pricing came at the midpoint of talk for a dividend of 5.75% to 6.25% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The convertible preferred shares were performing well on their secondary market debut.

The deal priced “cheap enough,” a market source said. “Guys liked the terms, especially the coupon.”

The recent rise of the energy sector increased the attractiveness of the deal, the source said.

The convertible preferreds were seen at $51.25 bid, $51.35 offered early in the session, a market source said. They were seen up to $52.00 later in the afternoon.

The preferreds saw heavy trading volume with 2.9 million shares traded.

Nabors common stock saw nearly 9x its average trading volume with 72.91 million shares in play versus the 90-day average of 8.97 million. Nabors common stock closed Thursday at $7.92, a decrease of 1.37%.

The convertible preferreds will be listed on the New York Stock Exchange under the symbol “NBRPrA.”

They freed for over-the-counter market business under the temporary ticker “NBBRF.”

EZCorp upsizes

EZCorp priced an upsized $150 million of seven-year convertible notes prior to the market open on Thursday with a coupon of 2.375% and an initial conversion premium of 20%.

Pricing came at the midpoint of talk for a coupon of 2% to 2.5% and at the cheap end of talk for an initial conversion premium of 20% to 25%, according to a market source.

The greenshoe was also upsized to $22.5 million. The initial size of the deal had been $100 million with a greenshoe of $15 million.

The deal was heavily oversubscribed, a market source said. “There was pretty strong outright demand and a significant number of outright orders,” the source said.

The new 2.375% notes were not as active in the secondary space as AXA or Nabors, sources said. About $12 million bonds traded by mid-afternoon.

The notes were seen at par bid prior to market open and were trading between 100.25 to 100.5 with stock down 10 to 15 cents.

EZCorp stock closed Thursday at $13.10, a decrease of 1.13%.

Scorpio’s exchange

Scorpio Tankers’ new 3% convertible notes due 2022 were also active on the tape with more than $11 million bonds traded by mid-afternoon, a market source said.

The new notes were seen trading up to 101. Scorpio Tanker’s stock closed Thursday at $2.81, a decrease of 4.1%.

Scorpio Tankers announced Thursday it priced $175 million of the 3% notes in exchange for $175 million of the company’s 2.375% convertible notes due 2019.

The 2.375% notes had $360 million outstanding prior to the exchange, according to Trace data. The 2.375% notes traded up to 97.375 on Thursday after closing Wednesday at 96.75, according to trace data.

Mentioned in this article:

Akoustis Technologies Inc. Nasdaq: AKTS

Amedica Corp. Nasdaq: AMDA

AXA Equitable Holdings, Inc. NYSE: EQH

EZCorp Inc. Nasdaq: EZPW

Nabors Industries Ltd. NYSE: NBR

Scorpio Tankers Inc. NYSE: STNG

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