Morning Commentary: Pebblebrook Hotel Trust convertible notes offering eyed; Uber active

By Abigail W. Adams

Portland, Me., Dec. 10 – The convertibles primary market continued to roll out new offerings, adding to an already groundbreaking year for new issuance.

Pebblebrook Hotel Trust plans to price $350 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of 525 basis points over Libor and a 35% vol., sources said.

Using those assumptions, the deal looked 2.73 points cheap at the midpoint of talk, a source said.

However, another source pegged assumptions at 800 bps over Libor and a 45% vol., which modeled out to par.

While the real estate investment trust that focuses on urban hotels and lifestyle resorts has straight debt that was priced at 250 bps to 275 bps over Libor, that was pre-Covid, a source said.

“They’re income is getting worse every month,” the source said.

As market players eyed the new deal in the works, the convertibles secondary space continued to see heavy volume.

There was $207 million on the tape a little over one hour into the session.

Uber Technologies Inc.’s 0% convertible notes due 2025 topped the volume charts and continued to gain on an outright and dollar-neutral basis.

The notes traded up to 104.625 early in the session with stock off.

There was more than $8 million on the tape.

Uber stock was changing hands at $53.52, a decrease of 0.5%, shortly before 11 a.m. ET.

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