Morning Commentary: Convertible market takes a breather after active week in the primary

By Stephanie N. Rotondo

Phoenix, June 27 – Friday morning’s activity in the convertible bond market was muted at best, a trader said.

“There’s nothing really moving a lot,” he said.

Still, AmSurg Corp.’s newly priced $150 million of 5.25% mandatory convertible preferred stock, series A-1, was holding in well after pricing late Thursday.

A trader quoted the shares at par ˝ bid, 101 offered.

The company’s stock, however, was down 61 cents, or 1.33%, to $45.19 in early trading.

The shares carry an initial conversion premium of 20.5%.

The convertibles were talked to yield 5.25% to 5.75% with an initial conversion premium of 17.5% to 22.5%, according to a syndicate source.

Additionally, the issue came upsized from $125 million.

The conversion ratio is 1.8114 shares per $100 liquidation amount, or $55.21 per common share.

Unless converted earlier, each preferred will convert automatically on July 1, 2017 into between 1.8141 and 2.2222 shares, subject to customary anti-dilution adjustments. The conversion rate will be determined based on the average volume-weighted average price per share of AmSurg common stock over the 20 consecutive trading days beginning on the 22nd trading day immediately preceding July 1, 2017.

Citigroup Global Markets Inc., SunTrust Robinson Humphrey Inc., Barclays, Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and Raymond James were the joint bookrunning managers.

The registered mandatory deal priced concurrently with a public offering of $382.5 million of common stock. The offerings are not contingent on each other or on the consummation of AmSurg’s acquisition of Sheridan Healthcare Inc.

Together with common stock to be issued in the Sheridan transaction, additional debt financing and cash on hand, the proceeds from the stock and convertible offerings will be used to finance the Sheridan transaction, to repay borrowings under AmSurg’s existing credit facility and to repay the outstanding balance of its senior secured notes due 2020.

Nashville, Tenn.-based AmSurg acquires, develops and operates ambulatory surgery centers.

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