Morning Commentary: RH’s new convertible offering remains in market; secondary quiet

By Abigail W. Adams

Portland, Me., Dec. 6 – The convertibles secondary market was quiet early in Thursday’s session as equities stood poised for another brutal session with the Dow Jones industrial average opening the day down more than 500 points after closing Tuesday down 800 points.

Despite the market conditions, RH, formerly Restoration Hardware, remains in the market with its prospective offering of $300 million five-year convertible notes.

Price talk had the deal coming with a coupon of 0%, an initial conversion premium of 25% and a reoffer price of 99 to par, according to market source.

“It’s crazy they’re trying to do this,” a source said, noting the current market conditions.

However, the company was non-committal about the deal in its press release, saying it was an opportunistic offering the company was exploring.

While the overall market was down, RH stock continued to post gains with stock up another 1% early Thursday after a 10% gain on Tuesday after a positive third-quarter earnings report.

Meanwhile, secondary trading was light early in Thursday’s session with many on the sidelines as equities continued to tumble.

There is typically a delay in the convertible secondary market when equities get clocked, with many watching the market to determine their positions, a market source said.

Weatherford International Ltd.’s 5.875% convertible notes due 2021 were the most active early in Thursday’s session with $5 million on the tape.

The notes traded down 1.25 points outright to 70.25, a market source said.

The move comes with crude oil futures continuing to crater in the wake of the OPEC meeting.

Crude oil futures slid to $50.68, a decrease of $2.21 or 4.18%, shortly before 11 a.m. ET.

While the OPEC meeting reportedly ended, the press conference was pushed to Friday with no solid figures on production cuts surfacing.

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