Morning Commentary: Royal Caribbean, Nova hit the aftermarket, expand on debut

By Abigail W. Adams

Portland, Me., Oct. 14 – New paper was in focus in the convertible secondary space on Wednesday after the primary market priced $675 million in two heavily oversubscribed offerings.

Royal Caribbean Cruises Ltd. priced $500 million of three-year convertible notes and Nova Measuring Instruments Ltd. priced an upsized $175 million of five-year convertible notes after the market close on Tuesday.

Both issues were in high demand during bookbuilding and priced through initial talk.

The demand followed the notes into the secondary space with both issues performing well on an outright and dollar-neutral basis.

Royal Caribbean expands

Royal Caribbean priced $500 million of three-year convertible notes after the market close on Tuesday at par with a coupon of 2.875% and an initial conversion premium of 37.5%, according to a company news release.

Pricing came at the rich end of revised price talk for a coupon of 2.875% to 3.375% and through revised talk for an initial conversion premium of 30% to 35%, according to a market source.

Initial price talk was for a coupon of 3.375% to 3.875% and an initial conversion premium of 25% to 30%.

Concurrently with the convertible notes offering, Royal Caribbean priced a secondary offering of 8,333,333 shares at a price of $60 per share.

The 2.875% notes were in focus and trading up on an outright and dollar-neutral basis.

They were changing hands between 100.75 and 101.5 early in the session with stock up slightly.

They expanded about 1 point dollar-neutral, a source said.

There were a large amount of swap trades on the tape.

Royal Caribbean stock was changing hands at $60.55, a decrease of 0.091%, shortly before 11 a.m. ET.

Nova skyrockets

Nova priced an upsized $175 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 0% and an initial conversion premium of 27.5%, according to a market source.

Pricing came in line with revised price talk for a fixed coupon of 0% and a fixed initial conversion premium of 27.5%.

Initial talk was for a fixed coupon of 0% and an initial conversion premium of 20% to 25%.

The greenshoe was also upsized to $25 million.

The initial size of the offering was $150 million with a greenshoe of $22.5 million.

While volume was light early in the session, the 0% notes skyrocketed.

They were marked at 103.25 bid, 104 offered with stock off early in the session.

The notes saw a large dollar-neutral expansion, a source said.

Nova stock traded to a low of $56.89 early in the session but was changing hands at $58.58, an increase of 0.12%, shortly before 11 a.m. ET.

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