TCP Capital trades a bit higher on debut; two deals launch in Europe; Tesla bonds slip

By Rebecca Melvin

New York, Aug. 31 – There was a new deal in the U.S. convertibles market and two deals that launched in the European convertibles market on Wednesday – one of those also priced later in the day – marking the last day of August and another day closer to a market reset hoped for following the summer vacation slowdown.

TCP Capital Corp.’s new 4.625% convertibles traded up to as high as about 102 on Wednesday after the Santa Monica, Calif.-based specialty finance company priced an upsized $125 million of the 5.5-year senior notes in an overnight deal at the midpoint of coupon talk, a syndicate source said.

“It was a successful deal, and it traded up,” the syndicate source said.

In Europe, Inmarsat plc launched an offering of about $550 million of seven-year convertible bonds that were talked to yield 3.625% to 4.125% with an initial conversion premium of 30% to 35%, and Remy Cointreau SA launched and priced €275 million of 10-year bonds convertible into new or existing shares, or Oceanes, to yield 0.125% with an initial conversion premium of 40%. That represented the midpoint of price talk.

The two European deals were not seen as pointing to a reopening of the primary market in the United States, however.

“I don’t know that there’s any correlation between Europe and here when it comes to pricing convertibles,” a New York-based trader said.

Back in secondary market action, Tesla Motors Inc.’s two longer-dated convertibles traded a bit weaker after reports that Tesla is repaying $422 million for its shorter-dated 1.5% convertibles due 2018, leaving about $224 million of that issue left outstanding. Tesla expects to repurchase the bonds in the third quarter.

The Tesla 1.5% convertibles that are in-the-money weren’t seen to have traded. But the Tesla 0.25% convertibles due 2019 traded last at 89, which was down from 91 and 91.125 earlier Wednesday and at about 91 on Tuesday.

Trading overall was on the light side as has been the case for much of the second half of August. Trading is slowing down even more heading into the long holiday weekend in observance of Labor Day on Sept. 6, but there were market players eyeing this week’s economic data including the U.S. nonfarm payrolls report for August slated for Friday.

New TCP trades up

TCP Capital’s newly priced 4.625% convertibles traded up to as high as 102 and changed hands between 100 and 102 on their first-day dealings on Wednesday, according to a syndicate source.

The common stock of TCP Capital, which underlies the bonds, was down 15 cents, or nearly 1%, at $16.53 on the day.

TCP priced an upsized $125 million of 5.5-year convertibles ahead of the market open to yield 4.625% with an initial conversion premium of 10%.

The company’s higher credit quality and the deal’s hefty coupon made investors amenable to the new deal, but the low premium was frowned upon by one market source.

The Rule 144A deal was initially talked at $100 million in size. Pricing of the senior unsecured notes came at the midpoint of 4.5% to 4.75% talk for the premium and at the fixed 10% initial conversion premium.

Raymond James & Associates Inc. was the bookrunner for the deal for which there is an additional $15 million of notes to cover over over-allotments.

The company intends to use the proceeds to repay debt under its revolving credit facilities, which will increase the funds available under the revolver to make additional investments in portfolio companies in accordance with its investment objective, and for other general corporate purposes.

Santa Monica, Calif.-based TCP Capital is a specialty finance company focused on credit lending to middle-market companies and small businesses.

Mentioned in this article:

Inmarsat plc London: ISAT

Remy Cointreau SA Paris: RCO

TCP Capital Corp. Nasdaq: TCPC

Tesla Motors Inc. Nasdaq: TSLA

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