By Abigail W. Adams
Portland, Me., Dec. 11 – Cowen Inc. announced plans to price five-year convertible notes after the market close, according to a company release.
Cowen and Nomura Securities International Inc. are joint bookrunners for the Rule 144A offering, which will carry a greenshoe.
Proceeds will be used to repurchase a portion of Cowen’s outstanding 3% cash convertible notes due 2019 and repurchase up to $25 million of class A stock from purchasers of the notes in privately negotiated transactions.
The share buyback will close on the same date as the closing of the offering, according to a company release.
In trading, Meritor Inc.’s 3.25% convertible notes due 2037 were in focus during Monday’s session with the notes and equity losing some ground.
Meritor announced on Friday it would invest in TransPower as part of the global automotive parts manufacturer’s efforts to expand into the electric vehicle market.
Meritor is also working with other truck manufacturers in direct competition with Tesla Inc. to develop an electric commercial truck. While Tesla’s 0.25%, 1.25%, and 2.375% convertible notes did not see as much trading action as Meritor, all made gains during the session.
Intel conversions expected
This week marks the last week for Intel Corp.’s 2.95% convertible notes due 2035 before their redemption on Dec. 18. The highly liquid notes have been a mainstay of trading in the convertible space and continued to see heavy volume trading by dollar amount during Monday’s session.
Holders will be converting their notes on Dec. 15, so as not to lose out on the coupon payment, according to a market source. Holders who convert the notes prior to Dec. 15 will lose out on the coupon due to a stipulation in the redemption akin to a “screw clause,” a market source said.
Watching the Fed
All eyes will be on the Federal Reserve on Tuesday and Wednesday when the board of governors convenes for its policy meeting.
There is little doubt the Federal Reserve will raise its benchmark interest rates. However, the market will be paying close attention to indications of what interest rates will look like in the future.
In September, the Federal Reserve projected it would raise interest rates three times in 2018. The meeting on Tuesday and Wednesday will determine whether the Federal Reserve intends to stay the course.
With mixed economic data and uncertainty surrounding inflation, market sources predict a continuation of slow and steady rate increases.
Electric big rigs
Meritor’s 3.25% convertible notes due 2037 were in focus on a quiet day on the secondary market. The notes, issued in September, dropped a little more than 1.5 points in active trading to 104.2, according to a market source.
Meritor stock was also down closing the day at $23.20, a decrease of 3.37%.
Meritor announced on Friday it was partnering with TransPower to provide electrical vehicle technologies for medium and heavy duty trucks, as part of the company’s ongoing effort to expand into the electric vehicle industry.
TransPower is one of several truck manufacturers that Meritor is working with in the development of electric commercial vehicles. Meritor developed the suspension system for the Nikola One, a hydrogen-electric truck in development by Nikola Motor Co., which plans to begin field tests in 2018.
In November, Tesla unveiled its plans to produce an electric big rig. Tesla’s convertible notes did not attract the same attention as Meritor’s on Monday but they did climb alongside Tesla stock with reports that deliveries of the company’s Model 3 sedan had begun.
Tesla’s 0.25% convertible notes due 2019 climbed about 2 points to 108, according to Trace data. Tesla’s 1.25% convertible notes due 2021 also climbed about 2 points to 110.
Tesla’s 2.375% convertible notes due 2022 traded between 118.64 and 120.485 before ending the day at 119.674, according to Trace data.
The 2.375% notes had been in the 115 range last week. Tesla subsidiary Solar City’s 1.625% notes due 2019 were also active during Monday’s session although with little change. The notes ended the day at 92.875.
Tesla stock ended the day at $328.91, an increase of 4.37%.
Intel
Intel’s sister convertibles have dominated trading activity since the company announced in mid-November it would redeem its 2.95% convertible notes and continue to swap hands just days before they are called.
The notes will be redeemed at par plus accrued interest on Dec. 18. Holders of the 2.95% notes are waiting until Dec. 15 to convert the notes, according to a market source.
There is a stipulation akin to a “screw clause” on the redemption of the notes, a market source said. Holders who convert the notes after the close of business on Dec. 1 and before the opening of business on Dec. 15 must pay Intel an amount equal to the interest payable by Intel on Dec. 15.
Investors are waiting until Dec. 15 to not miss out on the coupon payment. The final conversion value will be determined after a five-day averaging period next week.
Intel’s 2.95% and 3.25% convertible notes saw some of the heaviest volume trading by dollar amount during Monday’s session.
The 2.95% notes were at 161 in early trading after slowly dropping off in value last week as the call date approaches. They made gains during the session to end the day at 162.
The 2.95% notes were trading steady at 165 in late November.
Intel’s 3.25% notes have also seen a drop off in value since its sister convertible was called. The notes ended Monday’s session at 209.853, according to Trace data. They were trading in the 216 range in late November.
Intel stock ended the day at $43.66, an increase of 0.72%.
Mentioned in this article:
| Cowen Inc.: | Nasdaq: COWN
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| Meritor Inc.: | NYSE: MTOR
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| Tesla Inc.: | Nasdaq: TSLA
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| Intel Corp.: | Nasdaq: INTC
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