GM launches $1 billion new deal; LifePoint trades up as many swap into new paper from older issue

By Ronda Fears

Memphis, May 23 - General Motors Corp. launched a new $1.1 billion convertible after Wednesday's close, and while many onlookers first thought it would be an overnighter, there is a full day of marketing staged for the deal.

LifePoint Hospitals Inc. priced its new $500 million convertible a little richer than many expected, but traders said it moved up as players got comfortable with the carry. One market source said many holders of the old LifePoint convertibles were swapping into the new paper because of more appealing conversion language.

Otherwise, Spartan Stores Inc. was at bat after Wednesday's close with a $75 million offering of 20-year convertible senior notes.

GM refinancing put

The new GM two-year convertible bullet was talked to yield 1.75% to 2.25% with an initial conversion premium of 20% with proceeds earmarked in part to replace $1.1 billion in convertible securities put to the company in March.

GM shares (NYSE: GM) slid in after-hours activity on the news, dropping 73 cents, or 2.32%, to $30.70 after closing the session with a gain of 7 cents at $31.45.

There is an over-allotment option for a further $165 million.

Citigroup, Deutsche Bank and Goldman Sachs are joint bookrunners of the registered offering.

The senior unsecured notes are non-callable. There are no puts.

The issue offers takeover and dividend protection.

In addition to paying the put on the older convertibles, GM said the offering was being made to "bolster liquidity at a time when the capital markets present an attractive opportunity to do so." The company said any remaining proceeds might go toward its overall turnaround plan.

The Detroit-based automaker also said it has received a commitment for a supplemental revolving credit facility of roughly $4.1 billion, which it expects to be secured by its equity stake in former finance arm General Motors Acceptance Corp., or GMAC, in which it still owns 49%.

The new convertible issue is slated to price after the market close Thursday.

LifePoint trades up to 101.6

LifePoint priced $500 million of seven-year convertible senior subordinated notes on Tuesday at par to yield 3.5% with an initial conversion premium of 36.5% - at the midpoint of yield guidance for a coupon of 3.25% to 3.75% and at the aggressive end of premium talk of 32.5% to 37.5%.

While it priced more aggressively than many expected, traders said it moved up to 101.6 versus a stock price of $38.50. LifePoint shares (Nasdaq: LPNT) settled at $38.30 for a gain of 0.95%, or 36 cents.

"People got comfortable with the carry," remarked a convertible analyst on the sellside.

Ahead of the deal pricing, analysts were calling the issue rich by as much as 2% at the midpoint and fair to modestly attractive at the cheap end of price talk, so the final terms were somewhat of a surprise and the deal was expected to trade down.

But, the above analyst said many holders of the old LifePoint convertibles were swapping into the new paper because of more appealing conversion language. He said it garnered both outright and hedge interest.

LifePoint language appeals

The new LifePoint was more appealing to holders of its older convertible, the analyst said, because of language regarding the need to get bank waivers before a conversion.

The new issue has very similar conversion restrictions to LifePoint's older convertible, such that to convert into common equity the holders must get a waiver from LifePoint's banks, he said. But, the old issue states that if the bank waivers are not procured then it does not trigger a default event.

In the new issue, if the bank waivers are not procured, then a default event is triggered, thereby giving holders another route to pursue.

Otherwise, the issue is fairly straightforward, including takeover protection.

The convertibles are non-callable. There are no puts.

Citigroup was bookrunner of the registered offering.

There is an over-allotment option for a further $75 million.

Brentwood, Tenn.-based LifePoint, a rural hospital operator, said it will use proceeds to repay an outstanding revolving loan that bears an annual interest rate of 7.11% and an outstanding term loan that bears an average annual interest rate of 6.97%.

Spartan new deal on deck

All was quiet regarding the tiny $75 million deal from Spartan, although the underlying common stock (Nasdaq: SPTN) fell to $26.04, marking a loss of $2.37 on the day, or 8.34%.

Spartan Stores plans to price $75 million of 20-year convertible senior notes on Wednesday after the market closes, talked at a coupon of 3% to 3.5% and an initial conversion premium of 35% to 40%.

The convertibles will be offered at par.

There is an over-allotment option for a further $15 million.

Banc of America and Bear Stearns are the bookrunners of the Rule 144A offering.

Spartan, a Grand Rapids, Mich.-based grocery distribution company, said it will use the proceeds of the deal to repay an outstanding revolving loan and fund working capital, capital expenditures and other general corporate purposes.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.