Ventas convertibles flat on hedge; Bread Financial soars; Welltower active; Vail gains

By Abigail W. Adams

Portland, Me., June 9 – It was an active day in the convertibles secondary space as $1.025 billion in new supply made its aftermarket debut.

Bread Financial Holdings Inc. priced $275 million of five-year convertible notes and Ventas Realty, LP priced an upsized $750 million of three-year notes exchangeable for parent company Ventas Inc.’s common shares after the market close on Thursday.

The notes played to heavy demand during book building with both offerings well oversubscribed.

They hit the secondary space on another mixed day for equities with the Dow Jones industrial average closing Friday up 43 points, or 0.13%, the S&P 500 index closing up 0.11%, the Nasdaq Composite index closing up 0.16% and the Russell 2000 index closing down 0.80%.

There was $159 million in reported convertibles trading volume about one hour into the session and $600 million on the tape about one hour before the market close with the new paper accounting for almost one-quarter of activity.

The new paper followed different trajectories in the aftermarket with Ventas’ exchangeable notes largely flat while Bread Financial made strong outright and dollar-neutral gains.

Welltower Inc.’s 2.75% convertible notes due 2028 (Baa1/BBB+) were active with holders switching out of the notes for Ventas’ offering, which carried a similar profile.

While the secondary space was largely quiet outside of new issues, earnings-related volatility sparked some activity in outstanding issues.

Vail Resorts Inc.’s 0% convertible notes due 2026 were down outright but up on hedge with stock under pressure following an earnings miss.

Bread Financial surges

Bread Financial priced $275 million of five-year convertible notes after the market close on Thursday at par at the rich end of talk with a coupon of 4.25% and an initial conversion premium of 25%.

Price talk was for a coupon of 4.25% to 4.75% and an initial conversion premium of 20% to 25%.

The new paper played to heavy demand during book building with the offering more than 3x oversubscribed, a source said.

The strong demand followed the notes into the aftermarket where they soared on debut.

The 4.25% convertible notes were changing hands at 102.375 versus a stock price of $30.82 early in the session.

The notes came in alongside stock and were trading at 101 versus a stock price of $30.60 in the late afternoon.

The expanded about 1.5 points dollar-neutral, a source said.

There was $74 million in reported volume.

Bread Financial’s stock wavered between gains and losses early in the session before turning negative.

Stock traded to a low of $30 and a high of $30.91 before closing at $30.25, down 1.59%.

Ventas flat

Ventas priced an upsized $750 million offering of three-year exchangeable notes after the market close on Thursday at par at the cheap end of talk with a coupon of 3.75% and an initial exchange premium of 22.5%.

Price talk was for a coupon of 3.25% to 3.75% and an initial exchange premium of 22.5% to 27.5%.

The greenshoe was also upsized to $112.5 million.

The initial size of the offering was $500 million with a greenshoe of $75 million.

The deal was heavily oversubscribed during book building but fell flat in the aftermarket with the large upsize contributing to their lackluster performance.

The notes were trading at 100.125 versus a stock price of $44.65 early in the session, according to a market source.

They improved outright alongside stock although the notes saw little dollar-neutral movement.

They were trading at 101 versus a stock price of $45.61 in the late afternoon.

The notes expanded about 0.25 point dollar-neutral, a source said.

There was $119 million in reported volume.

Ventas’ stock traded to a low of $44.34 and a high of $45.77 before closing at $45.72, an increase of 2.17%.

Welltower active

Welltower’s 2.75% convertible notes due 2028 were active although little changed on Friday with holders switching out of the notes for Ventas’ new offering.

The 2.75% notes were trading at 101.75 versus a stock price of $80.52 in the late afternoon.

There was $18 million in reported volume.

Welltower’s stock traded to a low of $79.55 and a high of $81.15 before closing at $81.10, up 1.63%.

The notes were active as holders switched out of the issue in favor of Ventas’ new offering.

Welltower is also a REIT with a similar profile to Ventas, a source said.

Vail Resorts earnings

Vail Resorts’ 0% convertible notes due 2026 were down outright but up on hedge as stock sank following disappointing earnings.

The 0% convertible notes were off 1.375 points outright with stock down about 7%.

The notes were trading at 89.875 versus a stock price of $242.79 in the late afternoon.

The notes expanded about 1 point on the move down.

There was $12 million in reported volume.

Vail Resorts’ stock traded to a low of $237.51 and a high of $246.11 before closing at $239.66, a decrease of 7.10%.

Stock was heavy after the mountain resort company missed earnings expectations.

Vail reported earnings per share of $8.18 versus analyst expectations for EPS of $8.88.

Revenue was $1.238 billion versus analyst expectations for revenue of $1.246 billion.

Mentioned in this article:

Bread Financial Holdings Inc. NYSE: BFH

Vail Resorts Inc. NYSE: MTN

Ventas Inc. NYSE: VTR

Welltower Inc. NYSE: WELL

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