Sibanye brings new issue; Marriott Vacations, Maxwell add to calendar; Meritor on tap

By Stephanie N. Rotondo

Seattle, Sept. 19 – The convertible bond market remained muted on Tuesday – “It’s as generic as it gets,” one trader said – as investors waited for the new issue pipeline to start flowing.

Sibanye Gold Ltd. added a deal to calendar early in the day, a $450 million offering of convertible senior unsecured notes due 2023.

The issue priced before the close, coming at par to yield 1.875% with an initial conversion premium of 35%.

Price talk was for a 1.625% to 2.375% yield and an initial conversion premium of 30% to 35%.

Citigroup Global Markets Inc., BMO Capital Markets and RBC Capital Markets LLC are the joint global coordinators and joint bookrunners. Barclays is also participating as a bookrunner, while Mizuho International plc is acting as co-bookrunner.

After the bell, two more issues hit the tape.

Marriott Vacations Worldwide Corp. said it was offering $200 million of five-year convertible notes via a Rule 144A sale.

Price talk is for a 1.25% to 1.75% yield and an initial conversion premium of 27.5% to 32.5%, according to a market source.

J.P. Morgan Securities LLC, BofA Merrill Lynch and SunTrust Robinson Humphrey Inc. are the joint bookrunners.

The new issue will mark the Orlando-based hospitality company’s first foray into the convertible bond market.

Also new to the market is Maxwell Technologies Inc. The San Diego-based developer and manufacturer of capacitor energy storage and power delivery solutions announced a $50 million Rule 144A offering of five-year convertibles as well.

Price talk is for a 5% to 5.5% coupon and an initial conversion premium of 20% to 30%.

Barclays is the bookrunner.

The market was also still waiting for Meritor Inc.’s $300 million sale of unsecured convertible notes due 2037, a deal which was first announced on Monday.

Price talk is for a yield of 3.25% and an initial conversion premium of 60%.

Though the deal was expected to price Tuesday evening, details were not available as of 6:30 p.m. ET.

BNP Paribas, BofA Merrill Lynch, JPMorgan, RBC and PNC Capital Markets LLC are the joint bookrunners.

Teva notable again

In the secondary space, Teva Pharmaceutical Industries Ltd.’s 0.25% convertible notes due 2026 were again on the radar, though they were slightly lower, according to a market source.

The source placed the issue just north of 90.

Another source said the convertibles were trading either side of 90.

The underlying shares were meantime up over 1% on news the company had secured debt covenant amendments on its U.S. dollar and Japanese yen term loan and revolving credit facilities.

“In the Teva tradition of ‘better late than never,’ the company has (at last) faced the facts and amended its credit agreements to give it more headroom under its net leverage covenant, which was due to take a big step down to 4.25x at the end of the year and to tighten further in the second quarter of 2018,” wrote Gimme Credit LLC analyst Carol Levenson in an afternoon comment. Levenson has been saying for some time now that the company needed to address these matters, given the uncertainty of asset sale timing and earnings that so far this year have been disappointing.

But Teva has been on a tear recently, announcing last week that it had not only hired a new chief executive officer – its previous CEO stepped down in February – but that it had inked a deal to sell a portion of its women’s health unit.

“No doubt the asset sales announced in the past week (and the appointment of a new CEO, however vague the timing) helped in gaining the agreement of 98% of its lenders,” Levenson noted.

Jakks in focus

The entry of Toys ‘R’ Us Inc. into bankruptcy on Tuesday provided some relief for the company’s suppliers, such as Jakks Pacific Inc.

Last week, vendors were cutting shipments to the retailer on concerns they might not get paid. But a bankruptcy filing gives such group of creditors peace of mind that they will be paid – eventually.

As for Jakks, its convertible bonds were weaker in wake of the filing, though its stock rebounded.

A trader said the 4.875% convertible notes due 2020 were “weaker than the nuke,” trading in a 77 to 77.5 context.

“I would have thought they were trading 78 to 79,” he said.

The underlying equity closed up 2.5 cents at $2.825.

The trader further opined that the weakness in names like Jakks – a Malibu, Calif.-based designer and manufacturer of toys – was “overdone.”

“Obviously, there’s disruption in the chain,” he said. But no matter the situation trade creditors always get paid. “It may take some time, but they get paid.”

Still, he also remarked that Toys and its impact on names like Jakks was “interesting.”

“Enough guys own [Jakks] in the swap community that they will be interested,” he said.

Toys’ filing came less than two weeks after the company said it had hired Kirkland & Ellis to advise on its restructuring options. The struggling retailer had previously retained Lazard as a financial adviser.

Toys is hoping to use court proceedings to restructure its $5 billion debtload, $400 million of which comes due at the end of the year.

Mentioned in this article:

Jakks Pacific Inc. Nasdaq: JAKK

Marriott Vacations Worldwide Corp. NYSE: VAC

Maxwell Technologies Inc. Nasdaq: MXWL

Meritor Inc. NYSE: MTOR

Sibayne Gold Ltd. JSE: SGL

Teva Pharmaceutical Industries Ltd. NYSE: TEVA

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