New deal from Horizon Global pops; Virtus holds up post-pricing; TPG Specialty at par

By Stephanie N. Rotondo

Seattle, Jan. 27 – A flurry of new issues had the convertible bond market hopping in Friday trading.

Horizon Global Corp.’s $110 million of 2.75% convertible senior notes due 2022 were one of the day’s busiest traders, with one trader saying that the paper was going “up, up, up.”

One sellside source said the notes were trading around the 105 market.

Earlier in the session, a trader saw the paper around 104.5, though he noted that there were prints as high as 105.25 in early dealings.

The company’s stock was also faring well, rising 68 cents, or 3.62%, to $19.44.

The deal came late Thursday, upsized from $100 million. Pricing was on the rich end of the 2.75% to 3.25% yield talk. A 35% initial conversion premium was richer than the initial 27.5% to 32.5% talk.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC, BofA Merrill Lynch and BMO Capital Markets ran the books.

Concurrently, the company priced 4 million shares of common stock at $18.50 per share.

The notes are contingently convertible into cash, common stock or a combination.

Proceeds from the convertibles and stock will be used to repay $157.5 million of Horizon Global’s term loan, a paydown increased by $147.5 million due to the upsizing.

Remaining funds raised from the convertibles will be used to pay for convertible note hedge transactions.

Meanwhile, Virtus Investment Partners Inc.’s $100 million of 7.25% series D mandatory convertible preferred stock – a deal priced Friday with a conversion premium of 20% – was pegged “around par.”

The underlying equity traded down $1.30, or 1.17%, to $109.85.

The dividend came at the middle of the 7% to 7.5% talk, with an initial conversion premium of 17.5% to 22.5%.

Barclays, JPMorgan, BofA Merrill Lynch and Morgan Stanley & Co. LLC were the bookrunners.

Each $100-par convertible preferred will automatically convert on the third business day immediately following the settlement period. The settlement period will commence on the 22nd trading day immediately preceding Feb. 1, 2020.

Prior to Feb. 1, 2020, holders can convert the preferreds at the minimum conversion rate of 0.7576 shares. Holders can also convert upon a fundamental change at the fundamental change rate.

The maximum conversion rate is 0.9091 shares.

The initial reference price is $110, equal to $100 divided by the maximum conversion rate. The threshold appreciation price is $132, equal to $100 divided by the minimum conversion rate.

Concurrently with the convertible preferred sale, Virtus is offering $100.1 million of common stock. Neither offering is contingent upon the other.

Proceeds will be used for the acquisition of RidgeWorth Investments.

To that end, the company can redeem the issue in whole on Sept. 30 if the acquisition is not completed, or prior to such a date that an acquisition termination event occurs.

However, a trader said TPG Specialty Lending Inc.’s $100 million of 4.5% convertible senior notes due 2022 weren’t all that busy, though they were trading above par.

The stock was down 16 cents at $18.40.

That deal also came late Thursday, with an initial conversion premium of 15%. The premium was in line with talk, while the yield was at the cheap end of the 4.25% to 4.5% talk.

BofA Merrill Lynch and Morgan Stanley led the deal.

Conversions will be settled in cash, common stock, or a combination, at the company’s option. The issue is non-callable but is contingently convertible upon hitting a 130% price hurdle.

Proceeds from the Rule 144A deal will be used to pay down debt under a revolving credit facility.

Mentioned in this article:

Horizon Global Corp. NYSE: HZN

TPG Specialty Lending Inc. NYSE: TSLX

Virtus Investment Partners Inc. Nasdaq: VRTS

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