Convertibles floodgate opens; Wolfspeed, Brookdale, indie on deck; Carnival expands

By Abigail W. Adams

Portland, Me., Nov. 16 – The convertibles primary market stood poised for one of the highest volume weeks of the year with $1.55 billion set to price over three deals after the market close and a $1 billion offering making its aftermarket debut.

Wolfspeed Inc. plans to price $1.3 billion of seven-year convertible notes, indie Semiconductor Inc. plans to price $125 million of five-year convertible notes and Brookdale Senior Living Inc. plans to sell $125 million of $50-par three-year tangible equity units after the market close on Wednesday.

The offerings looked cheap and were heard to be playing to solid demand, despite the rough tape on Wednesday.

With new issuance at a historic low and some high-volume redemptions, the market is flush with cash ready to be put to work, a source said.

Meanwhile, Carnival Corp.’s $1 billion of five-year convertible notes made their aftermarket debut.

The new paper was putting in a solid performance in the secondary space despite an ugly day for equities.

Indexes were once again in the red as retail data and Fed speakers diminished hopes for a fed pivot.

The Dow Jones industrial average closed Wednesday down 39 points, or 0.12%, the S&P 500 index closed down 0.83%, the Nasdaq Composite index closed down 1.54% and the Russell 2000 index closed down 1.90%.

There was $400 million in reported volume in the late afternoon with Carnival accounting for nearly one-quarter of the volume on the tape.

However, Vroom Inc.’s 0.75% convertible notes due 2026 were also active with the notes surging, which sources attributed to the company’s open market repurchases of the distressed notes.

Wolfspeed on tap

Wolfspeed plans to price $1.3 billion of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.625% to 2.125% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of a 375 basis points credit spread and a 42% vol., according to a market source.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk.

The deal will most likely be oversubscribed with BorgWarner appearing to be taking down almost one-third of the offering size, sources said.

BorgWarner, a Durham, N.C.-based automotive supplier, announced in a separate press release a strategic partnership with Wolfspeed where it would invest $500 million in the financing transaction entitling it to purchase $650 million of devices annually.

“That’s a good way to secure your supply chain,” a source said.

The notes were trading with a premium in the gray market “but not running away,” a source said.

The convertible offering is Wolfspeed’s second pass at the convertibles market in 2022 with the bandgap semiconductor company pricing a $750 million issue of 0.25% convertible notes due 2028 in February.

Wolfspeed’s latest offering caused a repricing of the 0.25% notes, which fell 3.5 points outright and contracted 1.5 points dollar-neutral on Wednesday.

The 0.25% notes were changing hands at 97 versus a stock price of $92.44 in the late afternoon, according to a market source.

Wolfspeed’s stock traded to a high of $93 before closing Wednesday at the session low of $88.06, a decrease of 6.14%.

The new offering looked cheap in comparison to the outstanding notes, a source said.

indie looks cheap

indie Semiconductor plans to price $125 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 25% to 30%, according to a market source.

The deal was heard to be in the market with assumptions of an 850 bps credit spread and a 42% vol.

Using those assumptions, the deal looked about 4.125 points cheap at the midpoint of talk.

The deal was heard to have played to decent demand with books closing in the early afternoon, sources said.

Brookdale eyed

Brookdale Senior Living plans to price $125 million of $50-par three-year tangible equity units after the market close on Wednesday with price talk for a yield of 6.75% to 7.25% and a conversion premium of 12.5% to 17.5%, according to a market source.

The deal was heard to be in the market with assumptions of a 600 bps credit spread and a 45% to 40% vol. screw.

Carnival expands

Carnival priced $1 billion of five-year convertible notes after the market close on Tuesday at the cheap end of talk with a coupon of 5.75% and an initial conversion premium of 20%.

Price talk was for a coupon of 5.25% to 5.75% and an initial conversion premium of 20% to 25%.

The low conversion premium accounted for an anticipated 10% drop in stock sparked by the overnight offering with the real conversion premium most likely around 35% based on afterhours trading Tuesday, a source said.

The new paper was performing well despite a red day for equities.

The new notes were changing hands at 100.375 on an outright basis early in the session.

They were trading at 100.125 versus a stock price of $9.63 in the mid-afternoon.

The convertibles expanded about 0.5 point dollar-neutral, sources said.

Most players borrowed stock based off of the opening price with the overnight offering not allowing for hedging off of Tuesday’s closing price, a source said.

There was $115 million in reported volume.

Carnival’s stock traded to a high of $9.82 and a low of $9.49 before closing the day at $9.63, a decrease of 13.63%.

Vroom’s buyback

Vroom’s deeply distressed 0.75% convertible notes due 2026 surged in active trading on Wednesday, which sources attributed to open market repurchases of the convertible notes.

The 0.75% convertible notes jumped 6.5 points outright to 35 on Wednesday, a source said.

There was $18 million in reported volume.

The notes were previously trading at 28.5.

Vroom’s convertible notes have been wallowing in the 20s for most of the year.

Mentioned in this article:

Brookdale Senior Living Inc. NYSE: BKD

Carnival Corp. NYSE: CCL

indie Semiconductor Inc. Nasdaq: INDI

Vroom Inc. Nasdaq: VRM

Wolfspeed Inc. NYSE: WOLF

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