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Morning Commentary: Marriott Vacations, Two Harbors convertible note offerings eyed
By Abigail W. Adams
Portland, Me., Jan. 27 – The convertibles primary market had two deals in the works on Wednesday as equity markets stood poised for a brutal session with equity benchmarks opening firmly in the red.
In a crossover trade, Marriott Vacations Worldwide Corp., a frequent flyer in the high-yield market, was making its debut convertible notes offering with a $500 million offering of five-year convertible notes.
Two Harbors Investment Corp. plans to price $250 million of five-year convertible notes after the market close.
While the deal looked cheap based on underwriters’ assumptions, it was heard to be wall-crossed.
Marriott’s debut
Marriott Vacations plans to price $500 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%, according to a market source.
Two Harbors wall-crossed
Two Harbors plans to price $250 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%, according to a market source.
The deal was heard to be marketed with assumptions of 600 basis points over Libor and a 20% vol., which looked 1.41 points cheap at the midpoint of talk, a source said.
However, the small offering was heard to be wall-crossed.
Proceeds from the offering will be used to repurchase the company’s 6.25% convertible notes due 2022.
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