Morning Commentary: American Eagle Outfitters convertibles offering eyed; Inphi upsizes

By Abigail W. Adams

Portland, Me., April 22 – The convertibles primary market continued at a steady pace with one overnight deal pricing after the market close on Tuesday and another overnight deal on deck for after the market close on Wednesday.

American Eagle Outfitters, Inc. plans to price $400 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 3.25% to 3.75% and an initial conversion premium of 27.5% to 32.5%.

The deal is being marketed with assumptions of 950 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal looked about 4 points cheap at the midpoint of talk.

The deal also modeled about 4 points cheap with a slightly tighter credit spread and vol., another source said.

While the deal modeled cheap, “retail’s a tough one,” a source said. “It’s going to be an uphill battle.”

American Eagle is the third retailer to tap the convertibles market in as many weeks.

The already struggling sector has been among the hardest hit by the coronavirus.

American Eagle has furloughed store, field and corporate workers since April 5 and deferred the payment of its first-quarter dividend with stores shuttered due to the pandemic.

Meanwhile, Inphi Corp. priced an upsized $440 million of five-year convertible notes after the market close on Tuesday at par at the rich end of talk with a coupon of 0.75% and an initial conversion premium of 32.5%.

Price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The greenshoe was also upsized to $66 million.

The initial size of the offering was $330 million with a greenshoe of $50 million.

Concurrently with the new offering, the Santa Clara, Calif.-based semiconductor company entered into privately negotiated exchange agreements with holders of its 1.125% convertible notes due 2020.

The company exchanged $99.5 million of the principal amount of the 2020 notes for $99.9 million in cash, which represents principal and accrued interest and 1.4 million shares of common stock.

With spreads staying tight and volatility high, the steady pace of new deal activity is expected to continue.

© 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.