Sources have mixed feelings about new Atlas deal; RealPage outperforms; Becton lists on NYSE

By Stephanie N. Rotondo

Seattle, May 18 – Convertible bond investors had $560 million in new paper to play with as Thursday’s session got underway.

New issues from Atlas Air Worldwide Holdings Inc. and RealPage Inc. entered the market, with Atlas pricing $260 million of 1.875% convertible senior notes due 2024 and RealPage selling $300 million of 1.5% convertible senior notes due 2022.

The Atlas deal – which was run by Morgan Stanley & Co. LLC, BNP Paribas Securities Corp. and Citigroup Global Markets Inc. – came upsized from $250 million and with an initial conversion premium of 32.5%.

One market source said the deal “did great” upon pricing. However, another said the offering was “struggling a bit.”

As for RealPage, the Rule 144A offering came with a 27.5% initial conversion premium via Morgan Stanley and BofA Merrill Lynch.

The convertibles were seen trading above par post-pricing, as the company’s equity firmed.

Meanwhile, Becton, Dickinson & Co.’s $2,475,000,000 of 6.125% series A mandatory convertible preferred stock – a deal priced on May 11 with an initial conversion premium of 20% – listed on the New York Stock Exchange on Thursday under the ticker symbol “BDXA.”

The convertible preferreds were seen at $52.17, which compared to opening levels of $51.90.

The issue saw considerable trading, with nearly 752,000 shares being exchanged.

Initially, $2.25 billion of the mandatory convertibles were sold – along with $2.25 billion of common stock – and the next day, the company said its $225 million greenshoe had been fully exercised.

Price talk on the convertible preferreds was 6% to 6.5% with an initial conversion premium of 17.5% to 22.5%.

Citigroup, J.P Morgan Securities LLC, Morgan Stanley, MUFG, BNP Paribas, Barclays and Wells Fargo Securities LLC were the bookrunners.

The preferreds are mandatorily convertible on May 1, 2020. The initial conversion rate is a minimum of 4.7214 shares and a maximum of 5.6657 shares.

If the company’s previously announced acquisition of C.R. Bard Inc. falls through, it can redeem the issue at a make-whole premium.

Proceeds from both the preferred and common stock deals will be used to finance a portion of the cash consideration payable in connection with the company’s merger with Bard and to pay related fees and expenses.

Atlas’ reception mixed

Atlas Air Worldwide brought $260 million of 1.875% convertible bonds on Thursday.

Upon pricing, a trader said the new issue was “struggling a bit,” pegging the paper in a 99.875 to par context, as the underlying stock initially retreated 15 cents to $45.95.

The stock eventually ended off just 7 cents at $46.03.

As for Atlas’ older 2.25% convertible notes due 2022, most of the trading occurred in small size. The few round-lot trades occurred around a 98.5 to 98.625 context, which was about in line with Wednesday’s levels.

Conversions will be settled in cash, common stock or a combination, at the company’s option. The notes will be contingently convertible prior to Sept. 1, 2023 and convertible at any time after that date.

The initial conversion rate is 16.3713 shares per each $1,000 of notes, equal to $61.08 per share.

The notes are non-callable. Holders can put the issue in the event of a fundamental change.

Proceeds will be used to repay higher-cost revolving credit facility borrowings, to enhance business and financial flexibility, to support long-term growth, to fund the cost of hedging transactions and for general corporate purposes.

Atlas Air is a Purchase, N.Y.-based provider of outsourced aircraft and aviation operating services.

RealPage prices cheap

A trader said RealPage’s Rule 144A sale of 1.5% convertible notes was “doing a bit better” than the Atlas issue, trading at 101 bid against a stock price of $32.90.

The underlying equity managed to end even higher than that, rising 60 cents, or 1.82%, at $33.50.

Conversions will be settled in cash, common stock or both, at the company’s option. The issue will be contingently convertible prior to May 15, 2022, or at any time after that date.

The initial conversion rate is 23.8393 shares per each $1,000 of notes, equal to $41.95 a share.

A portion of the deal’s proceeds will go toward hedging transactions. The remaining funds will be used for general corporate purposes, which may include future acquisitions.

RealPage is a Richardson, Texas-based provider of software and data analytics to the real estate industry.

Mentioned in this article:

Atlas Air Worldwide Holdings Inc. Nasdaq: AAWW

Becton, Dickinson & Co. NYSE: BDX

RealPage Inc. Nasdaq: RP

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