Rayonier brings upsized sale of convertible preferreds; Priceline rises post-earnings

By Stephanie N. Rotondo

Seattle, Aug. 5 – The convertible bond market was treated to new issue early Friday, as Rayonier Advanced Materials Inc. priced $150 million of 8% series A mandatory convertible preferred stock.

The deal was upsized from $125 million. There is a $22.5 million over-allotment option.

Upon a pricing, a trader said the preferreds traded “above issue price” of par but that they were “coming in with the common stock” so that by mid-morning they were in a 99 to 99.5 context.

The common stock was off 26 cents, or 1.98%, to $12.67.

The issue will list on the New York Stock Exchange under the ticker “RYAMPA.”

Meanwhile, Priceline Group Inc.’s convertibles were making up the bulk of the day’s activity as the market reacted to the company’s better-than-expected earnings release.

The release came late Thursday.

A trader said the 1% convertible notes due 2018 were trading between 154.75 and 155, while the 0.9% convertible notes due 2021 were at 105.375.

“It looks like somebody is doing a swap, buying the 0.9s and selling the 1s,” he said. “They are buying duration.”

The equity was also on the rise.

In other earnings movers, Encore Capital Group Inc.’s 2.875% convertible notes due 2021 were trading down outright at 68.25, according to a trader.

The 3% convertible notes due 2017 were meantime at 96 versus a stock price of $21.75.

“That’s kind of crazy, because it’s next year’s maturity,” he said. “Those really do move on swap, it’s really more of an equity play.”

As for the equity, it was down as much as 15% in early trading – despite the fact that the company’s earnings beat expectations.

Priceline up on earnings

Priceline Group’s convertibles were trading actively, and better, in the wake of its earnings release.

“They are the whole thing today, the whole shebang,” a trader said.

The 1% convertible notes traded up to “154 and change,” according to a trader, while the 0.9% convertibles were trading with a 105 handle.

The trader opined that the issue was being swapped by some investor, selling off the 1% notes for 0.9% notes.

The positive earnings announcement also boosted the equity, which rose $54.23, or 3.99%, to $1,414.22.

On an adjusted basis, earnings per share came to $13.93, a gain of 12% year over year. Revenues also improved 12% to $2.56 billion.

Priceline had previously forecast revenue growth of 7% to 14%. That was due to a 19% gain in gross travel bookings, which came to $17.9 billion.

Analysts had expected EPS of $12.69 on revenue of $2.58 billion.

For the third quarter, the online travel company is forecasting revenue growth of 12% to 19%, with estimated EPS of $28.30 to $29.80.

Encore gets hammered

Encore Capital Group’s convertibles were “taking a beating,” a trader said, after the company’s latest quarterly results missed on revenue expectations.

“The stock was down more than it should be, because they did beat on the bottom line,” he added.

He pegged the 3% notes at 96 versus a stock price of $21.75.

By the close, the equity was down $4.16, or 16.86%, at $20.52.

Encore reported net income of $1.14 per share, a gain of 17.5% from the year before. On an adjusted basis, the company posted adjusted net income of $1.29 per share, beating Zacks Consensus estimate by 7.5%.

The EPS was up 6.6% year over year.

Revenue increased 2.4% to $289.4 million – missing Zacks Consensus estimate by 2.6%.

Mentioned in this article:

Encore Capital group Inc. Nasdaq: ECPG

Priceline Group Inc. Nasdaq: PCLN

Rayonier Advanced Materials Inc. NYSE: RYAM

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