New NRG gains outright, dollar neutral, older NRG in line; CorEnergy edges up; Impax launches

By Rebecca Melvin

New York, June 24 – NRG Yield Inc.’s new 3.25% convertibles improved on their debut in the secondary market on Wednesday after the Princeton, N.J.-based electricity generator priced $250 million of the five-year senior notes at the midpoint of talked terms.

The NRG 3.25% convertibles due 2020 ended the session at 103 versus an underlying share price of $23.53, a syndicate source said.

On a swap basis, the bonds improved 0.25 point on the day, which came in from a 0.375 point improvement earlier in the session, the source said.

The new NRG issue traded actively and was a primary focus of the session.

NRG’s older 3.5% convertibles due 2019 were also active and traded in line on a hedged basis, quoted at 110.75 with the stock at about $23.00 earlier in the session.

CorEnergy Infrastructure Trust Inc.’s new 7% convertibles were also a little higher on an outright and swap basis after the Kansas City, Mo.-based energy asset company priced an upsized $100 million of the five-year senior notes at terms that were cheaper than talk

The new CorEnergy convertibles were quoted at 100.75 bid, and also at 100.5 bid, 102.75 offered with the underlying shares at $6.15.

On a swap basis, they were slightly better, a syndicate source said.

After the market close, Impax Laboratories Inc. launched an overnight deal of $500 million of seven-year convertible notes that were talked to yield 1.5% to 2% with a 32.5% to 37.5% initial conversion premium.

Also after the market close, Northstar Realty Finance Corp.’s NorthStar Realty Europe Corp. launched a $300 million sale of 18-month convertibles that were expected to price later Thursday to yield 4% to 4.5%.

Back in established issues, Acorda Therapeutics Inc. 1.75% convertibles due 2021 traded up to around 104, which was “a big move on a dollar-neutral basis,” a New York-based sellsider said. On a heavy delta, the bonds were seen up more than a point.

Alpha Natural Resources Inc. remained active and steady after a sharp drop on Tuesday. Shares of the Abington, Va.-based coal producer dropped 4 cents, or 10%, to $0.35 after slipping 2 cents, or 4.9%, to $0.39 on Tuesday. The convertibles have been trading under 10.

In the broader markets, equities fell sharply amid rising concerns about a bailout package for Greece in the absence of an agreement. The Eurogroup of eurozone finance ministers was due to continue to discuss reform proposals for Greece late Wednesday.

If a compromise is reached, Greece will get €35 billion of European Union funds for economic development until 2020.

New NRG edges up on swap

NRG’s 3.25% convertibles due 2020 traded last around 103 versus the closing share price of $23.54.

Earlier the new bonds had been trading in the 101.5 bid, 102 offered context with the stock higher, a syndicate source said.

The bonds had been up by 0.375 point early in the day, but “came in a little bit at the end of the day,” a syndicate source said, for a 0.25 point expansion with the stock up 7% from where the follow-on stock offering was priced.

The swap price was based on a delta of about 50%.

In addition, the new issue traded actively with an estimated $100 million of bonds having changed hands.

The convertibles traded well from the get go with the stock higher at the open from where the follow on priced at $22.00 per share. The follow-on had priced at a 2.8% discount to Wednesday’s close.

“It improved on both an outright and hedged basis,” the syndicate source said.

NRG shares rose 90 cents, or nearly 4%, to $23.54 during the session after having dropped 8% on the heels of the deal launch.

NRG priced $250 million of the five-year convertible notes and $539.4 million of common stock.

Pricing of the notes came at the midpoint of talk, and the Rule 144A deal was brought via bookrunners Goldman Sachs & Co., RBC Capital Markets LLC, BofA Merrill Lynch, Barclays, Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC.

Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, KeyBanc Capital Markets Inc. and MUFG were co-managers.

The notes are non-callable and have dividend protection based on an escalating threshold through maturity. The dividend is currently 20 cents quarterly.

The notes will be convertible, under certain circumstances, into cash, shares of NRG Yield’s class C common stock or a combination at NRG Yield’s election.

The notes are guaranteed by NRG Yield LLC and NRG Yield Operating LLC.

Proceeds will be used to repay outstanding debt under the company’s revolving credit facility and debt associated with the company’s Alta X and Alta XI wind facilities. Any remaining proceeds will be used for general corporate purposes, including the acquisition of assets from NRG Energy Inc. or other third parties, although NRG Yield does not have any agreements to do so currently in place.

New CorEnergy upsized

The new CorEnergy 7% convertibles were seen at 100.75 bid around midsession. The price spread given later in the session was rather wide at 100.5 bid, 102.75 offered.

CorEnergy shares added a dime, or 1.7%, to $6.17.

The notes were upsized but pricing came cheaper than talked terms.

A syndicate source said: “It’s a small company with a big deal,” and to make it work, pricing had to be fixed where it was.

In addition to the 7% coupon, the deal had an initial conversion premium of 10%.

The deal was talked at a 5.75% to 6.25% coupon and a 12.5% to 17.5% premium.

The deal was upsized to $100 million from an initially talked $75 million.

There is a greenshoe for up to an additional $15 million of notes, which was upsized from $11.25 million.

CorEnergy also priced $67.5 million of common shares.

The bonds are non-callable and have dividend protection above a $0.15 quarterly threshold, compared to $0.135 currently.

Proceeds will be used to finance part of the company’s planned $245 million acquisition of the Grand Isle Gathering System, a subsea pipeline system in the Gulf of Mexico, from Energy XXI Ltd.

BofA Merrill Lynch and Wells Fargo Securities were joint bookrunning managers for both offerings.

CorEnergy is a Kansas City, Mo.-based company that owns U.S. energy infrastructure assets subject to long-term, triple net participating leases with energy companies.

Mentioned in this article:

Acorda Therapeutics Inc. Nasdaq: ACOR

Alpha Natural Resources Inc. NYSE: ANR

CorEnergy Infrastructure Trust Inc. Nasdaq: CORR

Impax Laboratories Inc. Nasdaq: IPXL

Northstar Realty Finance Corp. NYSE: NRF

NRG Yield Inc. Nasdaq: NYLD

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