Morning Commentary: Landmark Infrastructure prices; Chegg convertibles on tap; Tesla below par

By Abigail W. Adams

Portland, Me., March 28 – While quiet compared to the flurry of new deals that priced last week, the primary market continues to bring new paper into the convertibles space.

Landmark Infrastructure Partners LP priced $50 million, or 2 million shares, of $25-par series C floating-to-fixed rate cumulative perpetual convertible preferred units prior to the market open on Wednesday at par with a rate of Libor plus 469.8 basis points, equaling an implied dividend of 7%, and a fixed conversion premium of 15%.

Pricing came at the cheap end of talk for a rate of Libor plus 420 bps to Libor plus 470 bps, which equals an implied dividend of 6.5% to 7%, according to a market source.

The initial conversion premium was talked at a fixed level of 15%, according to a market source.

The convertible preferred units will float until May 15, 2025 and then switch to a fixed dividend of 9%.

The convertible preferred units will be listed on Nasdaq under the ticker “LMRKN.”

Chegg Inc. plans to price $250 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal comes with a call spread. Approximately $20 million of the proceeds will be used for a share buyback.

It is being marketed with a credit spread of 275 bps and a 40% vol., a market source said.

As new paper enters the convertibles space, Tesla, Inc.’s three tranches of convertible notes continued their downward spiral in early trading on Wednesday.

Tesla’s 0.25% convertible notes due 2019 dipped below par and were seen trading at 99.5 early in the session.

The 0.25% convertible notes were down about 2 points on an outright basis on Tuesday to trade around 101.

Tesla’s 1.25% convertible notes due 2021 traded down to 98 early in Wednesday’s session. They dropped 3 points on an outright basis to trade around 103 on Tuesday.

Tesla’s 2.375% convertible notes due 2022 dropped another 5 points on an outright basis to trade around 103. The 2.375% notes dropped about 4 points on an outright basis on Tuesday.

Tesla stock was down another 8% early in Wednesday’s session after dropping 8% on Tuesday. Investor confidence in the electric car manufacturer is waning amid speculation the production numbers for Tesla’s Model S sedans will again miss their mark.

The National Transportation Safety Board also announced Tuesday it is investigating the fatal accident involving a Tesla Model X in California on March 23 to determine whether the semi-automated driving system was engaged at the time of the accident.

Moody’s Investors Service also downgraded Tesla’s credit rating to B3 from B2 and changed the outlook to negative on Tuesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.