Primary calendar builds; Greenbrier pops on earnings beat, Mitsubishi deal; Teradyne ticks up

By Stephanie N. Rotondo

Seattle, April 5 – The convertible bond new issue calendar started to build up after the market closed on Wednesday.

GoPro Inc. announced plans for its first convertible debt issue, a $150 million offering of convertible senior notes due 2022.

The yield is talked at 3.5% with an initial conversion premium of 25%, a market source reported. Pricing is expected after Thursday’s close.

J.P. Morgan Securities LLC is the bookrunner on the Rule 144A deal.

Slated for pricing ahead of the open on Thursday, Prospect Capital Corp. is bringing a $225 million issue of convertible senior notes due 2022.

Price talk is for a 4.95% coupon and an initial conversion premium of 10%.

Goldman Sachs & Co. is running the books.

Proceeds will be used to repurchase some of the company’s other outstanding convertible bond issues.

Ahead of pricing, GoPro’s stock was at $8.43, unchanged day over day. Prospect Capital was down 8 cents at $9.07.

On the global scene, Zhejiang Expressway Co. Ltd. said it would price €365 million of 0% convertible bonds due 2022.

That deal was announced prior to the market’s open.

BOCI Asia Ltd., China International Capital Corp., Hong Kong Securities Ltd. and Citigroup Global Markets Ltd. are the bookrunners.

The convertibles will be sold to professional investors based in Hong Kong and outside the U.S. in accordance with Regulation S, the company said in a statement.

As for the secondary, more off-the-run names were making appearances in the convertibles market on Wednesday.

The Greenbrier Cos. Inc., for instance, announced its fiscal second-quarter results ahead of the market’s open. The results came in better than analysts expected, which helped the company’s convertible bonds edge higher.

A new $1 billion agreement inked with Mitsubishi UFJ Lease & Finance was also helping the securities trend upward.

Teradyne Inc.’s 1.25% convertible notes due 2023 were also moving up in the midweek session, as Citigroup analysts raised their stock price target.

Meanwhile, Tesla Inc. continued to be on the active side.

However, the 2.375% convertible notes due 2022 were coming in about half a point, closing around the 109 mark.

The paper had been off 1.5 points at mid-morning, according to a market source.

The source placed the paper at 108.25.

The underlying equity was also weaker, falling nearly 3% to $294.89.

Profit-taking was the likely culprit for the decline, as both the bonds and the stock have been on a tear since the company reported better-than-expected deliveries in the first quarter.

Great for Greenbrier

Greenbrier’s convertible bonds – as well as its equity – got a boost in the wake of better-than-expected earnings on Wednesday.

The 2.875% convertible notes due 2024 were seen trading mostly with a 108 handle during the session.

That compared to levels around 102 previously.

The 3.5% convertible notes due 2018 were meantime pegged at 141.

Another source saw the 3.5% convertibles at 142, a gain of 13.5 points on the day.

The company’s shares rose $4.30, or 10.01%, to $47.25.

For the fiscal second quarter, the Lake Oswego, Ore.-based railcar manufacturer reported adjusted earnings per share of $1.09 on sales of $566 million.

Analysts polled by Thomson Reuters had forecast EPS of 84 cents on sales of $521 million.

The company also upped its quarterly dividend to 22 cents per share.

For the full year, Greenbrier provided EPS guidance of $3.25 to $3.75.

Reuters is predicting EPS of $3.46.

In addition to the earnings, Greenbrier said it had inked a deal with Mitsubishi UFJ Lease & Finance for 6,000 new railcars through 2020.

Mitsubishi also has made Greenbrier is exclusive supplier of railcars through 2023.

The deal is valued at over $1 billion.

Teradyne ticks up

Teradyne’s 1.25% convertibles packed on a few points on Wednesday, following in line with a gain in the equity.

One source saw the convertibles ending at 118.25, which compared to levels in a 115 to 116 context previously.

Earlier in the day, another source deemed the paper up over 1.5 points, also at 118.25.

The stock meantime added 55 cents, or 1.76%, to finish at $31.73.

On Wednesday, Citigroup raised its equity price target on the Boston-based developer and supplier of automatic test equipment to $39.00 a share from $32.00 a share.

In its reports, Citigroup analyst Atif Malik said that the move was due to “higher collaborative robots (cobots) sales and multiple expansion.

“Our work with Citi industrials team suggests cobot market could exceed $1.5 billion or above [the company’s] $1 billion projection in 2020. Moreover, president Trump’s ‘America First’ policy that calls for an increase in American manufacturing will have a positive effect on the robotics industry, including the proliferation of cobot.”

Mentioned in this article:

GoPro Inc. Nasdaq: GPRO

Greenbrier Cos. Inc. NYSE: GBX

Prospect Capital Corp. Nasdaq: PSEC

Teradyne Inc. NYSE: TER

Tesla Inc. Nasdaq: TSLA

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