Morning Commentary: Royal Caribbean reopens convertibles primary with refinancing deal

By Abigail W. Adams

Portland, Me., Aug. 1 – The convertibles primary market returned to action on the first day of the new month after the first paperless July since at least 2001.

Royal Caribbean Group plans to price $900 million of three-year convertible notes after the market close on Monday with price talk for a coupon of 5.75% to 6.25% and an initial conversion premium of 37.5% to 42.5%.

The deal was heard to be in the market with assumptions of 1,000 basis points over Libor and a 45% vol., according to a market source.

Using those assumptions, the deal looked about 3.5 points cheap at the midpoint of talk.

Proceeds from the offering will be used to repurchase a portion of the company’s 2.875% convertible notes due Nov. 15, 2023 and 4.25% convertible notes due June 15, 2023 through open-market transactions, privately negotiated transactions, tender offers or otherwise, according to a company news release.

The amount slated to be raised covers about half of the outstanding amounts of the 2023 convertible notes, a source said.

The deal is the latest refinancing offering to clear the primary market with nearly all of the primary market activity in June refinancing deals.

Sources expect more refinancing deals to come as companies look to extend the maturities of their debt.

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