New Tutor Perini convertible expands on swap as shares rally; MTS Systems sells mandatory

By Rebecca Melvin

New York, June 10 – Tutor Perini Corp.’s newly priced 2.875% convertibles traded up on Friday after the Los Angeles-based construction management company priced an upsized $175 million of the five-year senior notes at the rich end of talked terms.

The new issue was initially talked to be $125 million in size.

The new Tutor Perini convertibles were seen last at 104.25 bid, 104.75 offered, with Tutor Perini shares up 86 cents, or 3.9%, at $22.86.

“They have taken off with the stock and done well. The stock rallied from about midmorning to noon, running up to $22.98 from $21.70. That’s a big move, percentage-wise,” a New York-based trader said.

Out of the chute, the new bond traded at 102.75 bid, 103.25 offered versus Thursday’s closing share price of $22.00, the trader said.

The new Tutor Perini deal, which was nicely upsized, accounted for much of Friday’s trading action, a trader said.

Also pricing was MTS Systems Corp.’s $100 million of three-year tangible equity units, or 1 million units at $100 each. That paper has a distribution rate of 8.75% and a premium over the threshold appreciation price of 20%.

MTS, an Eden Prairie, Minn.-based supplier of high-performance test systems and position sensors, is using proceeds to partially fund the acquisition of PCB Group Inc., a Depew, N.Y.-based designer, manufacturer and distributor of sensor technologies.

Internationally, Airbus Group SE priced €1.08 billion of 0% five-year bonds exchangeable into shares of Dassault Aviation SA. The Airbus deal priced at 103.75% of par to yield minus 0.73% and with an initial exchange premium of 37.5%.

And Adler Real Estate AG, a Hamburg, Germany-based real estate company, said Friday that it plans to issue up to €150 million of five-year convertibles that were talked to yield 1.5% to 2.5% with an initial conversion premium of 25% to 30%.

The market is still open, a trader said. The majority of deals have done well, including this week’s crop, which included Medicines Co.’s $350 million of 2.75% seven-year senior notes, which debuted in the market on Tuesday and traded up to about 102 on an outright basis, and Nevro Corp.’s $150 million of 1.75% convertibles, which rose to 105 on their debut in secondary market on Thursday.

But a notable loser was Softbank Group Corp.’s upsized $5.5 billion of mandatory securities exchangeable into Alibaba Group Holding Ltd. stock, which fell below par after pricing. The deal was upsized from an initially talked $5 billion and it has a greenshoe for up to an additional $1.1 billion.

The Alibaba mandatory is still down about 0.75 point to a point, a trader said, adding that it is likely to recover and move back above par once the market has a chance to absorb the mega-sized deal.

“It’s a cheap mandatory,” the trader said, suggesting that there would be demand for it. But at the same time, “some people have $200 million of this stuff, and they really got hurt,” the trader said.

Pricing last week, at the same time as Alibaba, was Weatherford International Ltd.’s 5.875% exchangeables. But that paper has surged upward since issue, trading last around 122.

“That thing is a beast,” a trader said, referring to how swiftly the paper moved up.

Back in established issues, the market was quiet on Friday and trading weakly on the back of selling overnight in the Asian and European markets.

“We’re seeing it here, and things are heavy,” the trader said of market weakness. The majority of the day’s action was in Tutor Perini, the trader said.

Overall this week, “things have been moving with the global CD markets. Things are heavy and everything is for sale. That’s the general pattern for the week,” the trader said.

Tutor Perini expands on swap

Tutor Perini’s new 2.875% convertibles traded up in early action on Friday after the Los Angeles-based construction management company priced an upsized $175 million of the five-year senior notes at the rich end of talked terms.

The convertibles traded initially at 102.75 bid, 103.25 offered versus a share price of $22.00, which was Thursday’s market close. Later the paper was lifted at 104.30, and the market was called 104.25 bid, 104.75 offered, with shares up 86 cents, or 3.9%, at $22.86.

They were up 3 points on swap, a trader said. Assuming a 60% delta, the paper was about 104.5 on a dollar-neutral, or hedged, basis in early afternoon trading.

The notes are non-callable for three years and then become provisionally callable subject to the stock trading above 130% of the conversion price. There are no investor puts, and the notes will be settled in shares or cash or a combination of shares and cash.

Proceeds are being used to repay a portion of borrowings outstanding on bank facilities, including the company’s term loan and revolving credit facility, and for general corporate purposes.

In connection with the offering, the company entered into a consent and second amendment to its credit facility, amending certain covenants to permit the company to perform its obligations under the convertible notes.

Mentioned in this article:

Adler Real Estate AG Germany: ADLG

Airbus Group SE Paris: AIR

Alibaba Group Holding Co. Nasdaq: BABA

Dassault Aviation SA Paris: AVMD

MTS Systems Corp. Nasdaq: MTSC

Medicines Co. Nasdaq: MDCO

Nevro Corp. Nasdaq: NVRO

Tutor Perini Corp. NYSE: TPC

Weatherford International plc NYSE: WFT

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