Morning Commentary: Chefs’ Warehouse, Chart Industries convertibles price, up on debut

By Abigail W. Adams

Portland, Me., Dec. 9 – The convertibles primary market closed one of the highest volume weeks of the year with two deals pricing.

Chart Industries Inc. priced an upsized $350 million $50-par depositary shares representing a 1/20th interest in $1,000 par three-year series B mandatory convertible preferred stock and Chefs’ Warehouse Inc. sold $250 million of six-year convertible notes after the market close on Thursday.

The two deals completed a tidal wave of primary market activity with 10 deals totaling $3.535 billion pricing over the past week.

The Dec. 5 week stands out as the busiest week for new deal activity by number of transactions by a large margin.

However, the Dec. 5 week still trails the $3.61 billion that priced over five deals during the Nov. 13 week and the $4.115 billion that priced in three deals during the Sept. 11 week, although the exercise of greenshoes may change the final tally.

After a hopping week, activity in the secondary space slowed on Friday with equity markets either side of unchanged.

“I think everyone’s exhausted,” a source said.

New paper from Chefs’ Warehouse and Chart Industries was putting in a solid performance in secondary market activity after the mixed performance of the paper to debut during Thursday’s session.

Chart upsizes

Chart Industries priced an upsized $350 million $50-par depositary shares representing a 1/20th interest in $1,000 par three-year series B mandatory convertible preferred stock after the market close on Thursday with a dividend of 6.75% and a threshold appreciation premium of 20%.

There is an upsized greenshoe of $52.5 million.

Pricing came at the rich end of talk for a dividend of 6.75% to 7.25% and at the midpoint of talk for an initial conversion premium of 17.5% to 22.5%.

The initial size of the offering was $300 million with a greenshoe of $45 million.

The depositary shares were marked at $50.75 bid, $51 offered versus a stock price of $119.75 a little more than one hour into Friday’s session.

Chart’s stock was changing hands at $119.63, an increase of 1.3%, shortly before 11 a.m. ET.

Chefs’ gains

Chefs’ Warehouse priced $250 million of six-year convertible notes after the market close on Thursday at par at the midpoint of talk with a yield of 2.375% and an initial conversion premium of 30%.

Price talk was for a coupon of 2.125% to 2.625% and an initial conversion premium of 27.5% to 32.5%.

The new paper was strong on debut and was marked at 101 bid, 101.75 offered with stock in the red early in the session, a source said.

Chefs’ stock was seen at $33.89, a decrease of 0.82%, shortly before 11 a.m. ET.

The new paper came as a refinancing with the company exchanging $158.4 million in principal of its 1.875% convertible notes due 2024 for $159.8 million in cash and 324,066 shares.

The 1.875% notes appeared to be bought back at 107.78, a source said.

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