Morning Commentary: Royal Caribbean Cruises, Nova convertible note offerings eyed

By Abigail W. Adams

Portland, Me., Oct. 13 – The convertibles primary market returned to action on Tuesday with two new deals set to price after the market close.

Royal Caribbean Cruises Ltd. plans to price $500 million of three-year convertible notes and Nova plans to price $150 million of five-year convertible notes after the market close on Tuesday.

Both offerings looked cheap based on underwriters’ assumptions, sources said.

Meanwhile, there was an uptick of activity in the secondary space with $122 million in reported volume a little over one hour into Tuesday’s session.

Royal Caribbean on tap

Royal Caribbean plans to price $500 million of three-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.375% to 3.875% and an initial conversion premium of 25% to 30%.

Underwriters were marketing the deal with assumptions of a credit spread of 1,000 basis points over Libor and a 40% vol., sources said.

Using those assumptions, the deal looked 4.29 points cheap at the midpoint of talk, a source said.

The deal is pricing concurrently with a secondary offering of $500 million shares.

The offering is Royal Caribbean’s second convertible notes offering.

The Miami-based cruise line operator priced a $1.15 billion issue of 4.25% convertible notes due 2023 in June.

The 4.25% convertible notes were slow to trade early in Tuesday’s session. They were last changing hands at 122.5, a source said.

Royal Caribbean’s stock was taking a beating early Tuesday. Stock traded down to $62.43, a decrease of 10.63%.

Nova in focus

Nova, a Rehovot, Israel-based semiconductor parts supplier, plans to price $150 million of five-year convertible notes after the market close on Tuesday with price talk for a fixed coupon of 0% and an initial conversion premium of 20% to 25%.

Underwriters were marketing the deal with assumptions of 400 bps over Libor and a 35% vol., sources said.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of talk.

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