Market eyes Energizer mandatory convertible preferred offering; Citrix, Intel active

By Abigail W. Adams

Portland, Me., Jan. 15 – Convertible primary market activity has been slow at the launch of the new year. However, another mandatory convertible offering is in the works.

Energizer Holdings, Inc. plans to price $187.5 million of $100-par three-year mandatory convertible preferred stock after the market close on Tuesday.

The deal was heard to be in demand during bookbuilding and is expected to do well in the secondary space.

Meanwhile, there was an uptick in trading volume in the secondary market with $60 million on the tape early in the session and $367 million on the tape later in the afternoon.

Citrix Systems Inc.’s 0.5% convertible notes due April 15, 2019 were again one of the most actively traded issues in the secondary space.

Intel Corp.’s 3.25% convertible notes due 2039 also saw high-volume activity with accounts most likely raising cash, a market source said.

Ensco plc’s 3% convertible notes due 2024 were also volume movers and slightly improved with crude oil futures on the rise.

Splunk Inc.’s 0.5% convertible notes due 2023 also saw a fresh round of trading activity on Tuesday, which was a strong day for the tech sector.

Energizer eyed

Energizer plans to price $187.5 million of $100-par mandatory convertible preferred stock after the market close on Tuesday with price talk for a dividend of 7.25% to 7.75% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The deal was heard to be in demand during bookbuilding with mandatory convertible paper scarce and Energizer a new name to the convertible universe, a market source said.

The deal comes with a call spread and is pricing concurrently with a $187.5 million offering of common stock.

The call spread on a mandatory convertible preferred stock deal is unique, a market source said.

“Someone was thinking outside the box,” the source said.

While not often seen on mandatory convertible preferred stock deals, the call spread raises the price of dilution to the common, the source said.

The dividend on the deal at surface level looks appealing, sources said. “It just keeps on going,” a source quipped.

However, the higher dividend is needed given the erosion of the premium over three years, another source said.

Energizer also has $500 million outstanding of 6 3/8% senior notes due 2026 which currently trades with a 7.25% yield, a source said.

In addition to the common stock and convertible preferred stock offering, the St. Louis-based manufacturer of batteries and portable lighting products is planning on launching a $500 million first-lien term loan and $600 million in senior notes in late January or early February.

The planned debt offerings are most likely why Energizer opted to price mandatory convertible preferred stock in lieu of a convertible bond offering, a source said.

Volume movers

Citrix’s soon-to-mature 0.5% convertible notes due April 15, 2019 were again among the most actively traded issues in the secondary space with more than $30 million of the bonds on the tape by the late afternoon.

The notes continued to trade at parity, a market source said. They were changing hands around 149.625 in the late afternoon.

Citrix stock closed Tuesday at $107.42, an increase of 1.34%.

The notes were among the most actively traded in the secondary space during Monday’s session and also saw high-volume activity throughout last week.

Intel’s 3.25% convertible notes due 2039 also saw high-volume activity with more than $28 million of the bonds changing hands, according to a market source.

The notes were trading just shy of 237.625. Intel stock closed Tuesday at $48.60, an increase of 0.52%.

The high-volume activity was attributed to accounts raising cash, a market source said.

Ensco active

Ensco’s 3% convertible notes due 2024 were again active in the secondary market with crude oil futures on the rise on Tuesday. The notes were slightly improved in the active trading.

They traded up about 0.5 point outright to 75.75 with the yield around 9%, according to a market source.

Ensco stock was also making gains, closing the day at $4.48, an increase of 2.28%.

The notes were continuing to ride the wave of the energy rally. Tuesday was a strong day for crude oil futures, which settled at $52.11, an increase of $1.60 or 3.2%.

Splunk up outright

Splunk’s 0.5% convertible notes due 2023 were active during Tuesday’s session with the notes climbing 1.5 points outright to 104.25 in the late afternoon.

Splunk stock traded as high a $118.91 during Tuesday’s session but closed the day at $117.88, an increase of 3.11%.

Splunk may be a potential acquisition target for Cisco Systems, according to an RBC Capital Markets analyst, Investor’s Business Daily reported.

Mentioned in this article:

Citrix Systems Inc. Nasdaq: CTXS

Energizer Holdings, Inc. NYSE: ENR

Ensco plc NYSE: ESV

Intel Corp. Nasdaq: INTC

Splunk Inc. Nasdaq: SPLK

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