Arbor Realty, Infinera on deck; Royal Caribbean jumps on debut; Uber, Lyft catch a bid

By Abigail W. Adams

Portland, Me., Aug. 2 – The convertibles primary market reignited activity in August following a month of no issuance with two offerings on deck and the second largest deal of the year making its aftermarket debut.

Infinera Corp. plans to price $275 million of six-year convertible notes after the market close on Wednesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 27.5% to 32.5%.

Jefferies LLC is bookrunner for the Rule 144A offering, which carries a greenshoe of $41.25 million.

Arbor Realty Trust Inc. plans to sell $200 million of three-year convertible notes after the market close on Tuesday.

The deal looked cheap based on underwriters’ assumptions and was heard to be doing well during bookbuilding.

Royal Caribbean Group priced an upsized $1 billion offering of three-year convertible notes after the market close on Monday.

The new paper jolted activity in the secondary space on a mixed day for equity markets.

Equity indexes again wavered between gains and losses before closing Tuesday mixed.

The Dow Jones industrial average closed Tuesday down 402 points, or 1.23%, the S&P 500 index closed down 0.67%, and the Nasdaq Composite index closed down 0.16%.

However, the Russell 2000 index closed Tuesday up 0.17%.

There was $800 million in reported volume about one hour before the market close with Royal Caribbean dominating the tape.

The cruise line operator’s new paper made a strong secondary market debut with the notes jumping on an outright and dollar-neutral basis.

The company’s existing 2.875% convertible notes due Nov. 15, 2023 and 4.25% convertible notes due June 15, 2023 also remained active with proceeds of the new notes used to repurchase a portion of the existing notes in privately negotiated transactions.

While Royal Caribbean dominated the tape, earnings-related news sparked activity in outstanding issuances.

Lyft Inc.’s 1.5% convertible notes due 2025 saw heavy volume with the notes up outright but unchanged dollar-neutral as stock spiked in anticipation of positive earnings following Uber Technologies Inc.’s results.

While less active, Uber’s 0% convertible notes due 2025 were also on the rise on an outright and dollar-neutral basis.

Arbor eyed

Arbor Realty plans to price $200 million of three-year convertible notes after the market close on Tuesday with price talk for a coupon of 7% to 7.5% and an initial conversion premium of 10% to 15%, according to a market source.

The deal was heard to be in the market with assumptions of 550 basis points over Libor and a 20% vol., according to a market source.

Using those assumptions, the deal modeled 2.7 points cheap at the midpoint of talk.

The deal was heard to be doing well during bookbuilding.

The offering is the latest in a series of refinancing deals with proceeds to be used to repurchase a portion of the company’s 4.75% convertible notes due Nov. 1, 2022 for cash.

The 4.75% convertible notes were wrapped around 101.5 on Monday, according to Trace data.

Royal Caribbean flies

Royal Caribbean priced an upsized $1 billion offering of three-year convertible notes after the market close on Monday at the midpoint of talk with a coupon of 6% and an initial conversion premium of 40%.

Price talk was for a coupon of 5.75% to 6.25% and an initial conversion premium of 37.5% to 42.5%.

The greenshoe was also upsized to $150 million.

The initial size of the offering was $900 million with a greenshoe of $135 million.

The new paper saw a strong secondary market debut.

The notes were trading at 102.5 out of the gate and continued to gain steam as the session progressed.

They were marked at 104 bid, 104.5 offered in the late afternoon.

The convertibles expanded 3 to 3.5 points on a dollar-neutral, or hedged, basis, sources said.

Royal Caribbean’s stock traded to a low of $35.10 and a high of $37.75 before closing the day at $36.66, an increase of 2.43%.

Proceeds from the offering were used to repurchase $350 million principal amount of the company’s 2.875% convertible notes due Nov. 15, 2023 and $800 million principal amount of the 4.25% convertible notes due June 15, 2023 in privately negotiated transactions.

The 2.875% notes appeared to be repurchased at 97, a source said.

They closed the day unchanged on a 95-handle.

The 4.25% notes appeared to be repurchased at par.

They closed the day unchanged from their previous trading level of 98.5.

Royal Caribbean gave itself leeway in how it intended to repurchase the notes in its initial press release with the company stating repurchases would occur through open-market transactions, privately negotiated transactions, tender offers or otherwise.

Ride sharing

Lyft’s 1.5% convertible notes due 2025 were lifted in heavy volume on Tuesday with the notes catching a ride on the positive momentum caused by competitor Uber’s results.

The 1.5% notes rose 3 points outright with stock up more than 16%.

The notes closed Tuesday just shy of 90.375 with the yield about 5.375%.

However, the high-premium notes were moving in line dollar-neutral, a source said.

Lyft’s stock traded to a low of $15.15 and a high of $16.22 before closing the day at $16.16, an increase of 16.26%.

The ride-sharing company saw its stock surge after competitor Uber’s earnings defied expectations.

Lyft is scheduled to report on Aug. 4.

While less active, Uber’s 0% convertible notes due 2025 gained on an outright and dollar-neutral basis.

The 0% notes gained 2.5 points outright.

They were changing hands at 86.75 in the late afternoon.

The notes expanded about 0.5 to 0.625 point on swap, a source said.

Uber’s stock traded to a high of $29.43 and a low of $27.10 before closing the day at $29.25, an increase of 18.90%.

Uber reported a large earnings beat on both the top and bottom lines.

The ride sharing company reported losses per share of 3 cents versus analyst expectations for losses per share of 5 cents.

Revenue was $8.07 billion versus analyst expectations for revenue of $7.37 billion.

Mentioned in this article:

Arbor Realty Trust Inc. NYSE: ABR

Infinera Corp. Nasdaq: INFN

Lyft Inc. Nasdaq: LYFT

Royal Caribbean Group NYSE: RCL

Uber Technologies Inc. NYSE: UBER

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