Algonquin Power equity units look cheap; Cracker Barrel, Cheesecake Factory below par

By Abigail W. Adams

Portland, Me., June 17 – The convertibles primary market continued to churn out new deals with one large offering set to price after the market close.

Algonquin Power & Utilities Corp. plans to price $900 million of three-year par-of-$50 equity units after the market close on Thursday.

The deal looked cheap and played to healthy demand during bookbuilding, sources said.

Meanwhile, the secondary space was relatively quiet despite a strong day for growth stocks.

While the tech-heavy Nasdaq composite closed the day up 0.87%, the S&P 500 index closed the day down 0.04% and the Dow Jones industrial average sank 210 points, or 0.62%.

There was $130 million in reported volume a little over one hour into the session and $585 million heading into the market close.

Several tech stocks that have issued 0% coupon convertible bonds saw their stock lifted during Thursday’s session.

However, Cracker Barrel Old Country Store Inc.’s 0.625% convertible notes due 2026 and Cheesecake Factory Inc.’s 0.375% convertible notes due 2026 dropped below par with the restaurant chains stocks under pressure.

Vroom Inc.’s 0.75% convertible notes due 2026 were also down on an outright basis with stock off.

Algonquin eyed

Algonquin Power plans to price $900 million of three-year par-of-$50 equity units after the market close on Thursday with a coupon of 7.375% to 7.875% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The deal was heard to be in the market with assumptions of 60 basis points over Libor and a 20% to 22% vol. skew.

Using those assumptions, the deal looked 2.26 points cheap at the midpoint of talk, a source said.

The Canadian-based renewable energy utility was an interesting company and the pricing of the deal was reasonable, another source said.

The offering played to solid demand and is expected to trade well in the secondary.

Below par

Cracker Barrel’s 0.625% convertible notes due 2026 slipped below par with stock under pressure during Thursday’s session.

The 0.625% notes traded down 1 point outright to 100.5 versus a stock price of $150.35 early in the session, according to a market source.

They continued to trend lower as the session progressed and were seen changing hands at 99.5 versus a stock price of $146.40 in the late afternoon.

The notes remained moderately active their second day in the secondary space with more than $16 million in reported volume.

Cracker Barrel’s stock traded to a high of $152.10 and a low of $146.02 before closing the day at $146.36, a decrease of 3.48%.

The notes saw a strong start in the secondary space on Wednesday with the notes closing the day up 1.5 points outright and expanding 0.75 to 1 point dollar-neutral.

Cheesecake Factory’s recently priced 0.375% convertible notes due 2026 also dropped below par during Thursday’s session.

While volume was relatively light, the 0.375% notes were down 1.25 points outright with stock off a little over 3%.

The 0.375% notes were changing hands at 99.25 versus a stock price of $54.

Cheesecake Factory’s stock traded to a high of $56.61 and a low of $52 before closing the day at $54.05, a decrease of 3.57%.

The notes traded as high as 103 on their aftermarket debut on June 11.

Vroom Day 2

Vroom’s 0.75% convertible notes due 2026 were also coming in slightly on an outright basis with stock off on Thursday.

The 0.75% notes were down 0.75 point outright with stock off about 1%.

They were changing hands at 101.625 versus a stock price of $41.45 in the late afternoon.

Vroom’s stock traded to a high of $42 and a low of $39.84 before closing the day at $40.77, a decrease of 0.95%.

The notes also saw a strong aftermarket debut on Wednesday. They traded up to a 102-handle on an outright basis and expanded about 1 point dollar-neutral.

Mentioned in this article:

Algonquin Power & Utilities Corp. NYSE: AQN

Cheesecake Factory Inc. Nasdaq: CAKE

Cracker Barrel Old Country Store Inc. Nasdaq: CBRL

Vroom Inc. Nasdaq: VRM

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