Morning Commentary: Ares Capital’s new convertibles lose momentum; Horizon’s upcoming deal eyed

By Stephanie N. Rotondo

Seattle, Jan. 25 – A convertible bond trader said there was less activity in Ares Capital Corp.’s new $350 million issue of 3.75% convertible notes due 2022 in early midweek dealings, after topping the charts on Tuesday.

Additionally, he said the paper had come in a bit, trading in a 99.875 to 100.25 context.

The underlying stock (Nasdaq: ARCC) was up 4 cents at $17.02.

The deal came Tuesday with a 15% initial conversion premium. Pricing overall was at the cheap end of the 3.25% to 3.75% yield talk, with a conversion premium of 15% to 20%.

J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, BMO Capital Markets and Goldman Sachs & Co. ran the books.

The notes are convertible at a rate of 51.5756 shares per each $1,000 of notes, equal to $19.39 per share.

Proceeds will be used to repay certain outstanding debt.

Looking ahead, Horizon Global Corp. is expected to price a $100 million offering of convertible senior notes due 2022 after the close on Thursday.

A trader commented that the company’s equity (NYSE: HZN) was trading below the $20.00 mark on Wednesday, marking the first time the stock has been under that threshold since August.

The shares were off $2.95, or 14.15%, at $17.92.

Price talk on the convertibles sale is a 2.75% to 3.25% yield, with an initial conversion premium of 27.5% to 32.5%.

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