Morning Commentary: Colony Capital upsizes, expands in trade; new Norwegian Cruise Line adds a point

By Rebecca Melvin

New York, July 17 – The new Colony Capital Inc. 5.75% exchangeable moved higher in active trade early Friday after the real estate investment trust priced an upsized $260 million of the five-year notes.

The new paper expanded more than four points and was last seen at 105 bid, according to a New York-based source.

Colony was the smaller of two deals which priced overnight, but it was the one dominating trade on Friday.

Also new to the market was Norwegian Cruise Line Holdings Ltd.’s 5.375% exchangeables, also heard to be higher in trade, but only about a point after the Miami-based cruise line priced an upsized $400 million of five-year exchangeable notes with a 25% initial exchange premium, according to the source.

Norwegian Cruise Line’s older 6% exchangeables due 2024 shed a point and traded at 129 in active trade in the early going on Friday.

The new Norwegian deal was initially talked at $250 million in size. Pricing came at the rich end of talked terms, which were for a coupon of 5.75% to 6.25% and an initial exchange premium of 20% to 25%.

The greenshoe was upsized to $60 million from $37.5 million.

The company also sold a $250 million secondary offering of 13.5 million shares at $15.00 per share and $675 million of senior secured straight notes due 2026. The straight notes are secured by a first-priority interest in, among other things, one of the company’s vessels.

The proceeds of both issues will be used to repay a $675 million senior secured revolving credit facility and to pay any related transaction fees and expenses, with the remainder of proceeds earmarked for general corporate purposes.

The exchangeables are non-callable, with no puts. There is standard takeover and dividend protection.

The Colony deal also priced at a 25% exchange premium. Colony shares were trading up about a cent or so at $1.86 in late morning trading.

It was initially talked at $200 million in size.

The proceeds of the deal will be used to redeem the company’s 3.875% convertible senior notes due 2021 prior to maturity or to repay the 2021 notes at maturity with any remaining proceeds for general corporate purposes.

The real estate investment trust is based in Los Angeles.

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