Morning Commentary: Arbor Realty Trust deal eyed ahead of pricing; DTE Energy active

By Rebecca Melvin

New York, Nov. 6 – Market players were sizing up Arbor Realty Trust Inc.’s planned $215 million three-year convertible and saw the issue looking pretty cheap using a credit spread of 300 basis points over Libor and 16% vol. at price talk of a 4.75% coupon and a 15% premium.

The deal looked to be worth 102.33 in that model, a New York-based market source said.

The Arbor Realty Trust notes were being talked at a 4.5% to 4.75% coupon with a 15% initial conversion premium, according to a second source.

The Arbor Realty deal is a shortish piece of paper, and this will be its fifth convertible, the source noted.

The new Arbor Realty issue is being based on a volume weighted average stock price going forward and is being priced concurrently with an exchange of existing notes for cash and shares.

The Rule 144A offering has a $32.25 million greenshoe and is being marketed by J.P. Morgan Securities LLC and JMP Securities.

Among mandatory convertibles trading on Wednesday, DTE Energy Co.’s 6.25% convertible preferred was the most active issue, a New York-based trader said.

The $1.15 billion DTE issue is the most recently priced mandatory, having priced Oct. 29 along with $302 million of common stock.

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