Resource Capital eyed after new issue prices; Heritage deal quiet; Sutherland notes list

By Stephanie N. Rotondo

Seattle, Aug. 11 – More new issues were in the convertible bond market on Friday, including an issue of 4.5% convertible senior notes due 2022 from Resource Capital Corp.

The deal priced late Thursday, with $110 million of the notes being sold and another $22.161 million issued in exchange for the company’s older convertible issues. The company had said that it planned to use proceeds from the deal to repurchase a portion of its 6% convertible notes due 2018 and its 8% convertible notes due 2020, though neither issue is callable prior to maturity.

A trader pegged the new issue at 100.875 toward the end of the day.

“Sounds cheap to me,” he said, given the optionality of the deal.

In early Friday dealings, a trader saw the 8% notes at 108 and the 6% notes at 102.875.

“Both issues crossed at those prices; the company bought [them] back,” he said.

As for the company’s stock, it was on the weaker side, slipping 7 cents to $10.58.

Credit Suisse Securities (USA) LLC is the bookrunner.

Conversions will be settled in cash, stock or both, at the company’s option.

The notes are convertible at any time prior to maturity and putable upon a fundamental change.

The bonds are non-callable for life.

Heritage Insurance Holdings Inc. also brought a deal late Thursday, pricing a $125 million offering of 5.875% convertible senior notes due 2037 with a 32.5% initial conversion premium.

The deal came at the cheap end of talk for a yield of 5.375% to 5.875% and at the middle of premium talk of 30% to 35%.

A trader said he hadn’t seen much in the name and blamed that on the fact that it wasn’t a well-known company.

“Underwriters for these smaller names, they keep it all and nothing goes out into the street,” he said.

However, the underlying equity was on the rise, adding 27 cents, or 2.4%, to close at $11.53.

Citigroup Global Markets Inc. is the bookrunner for the Rule 144A offering.

Proceeds will be used to repurchase $40 million of shares in privately negotiated transactions through Citigroup and to fund the cash portion of the acquisition of NBIC Holdings, Inc.

Conversions will initially be settled in cash. Once shareholders approve the issuance of stock related to the deal, conversions will be settled with a combination of stock and cash.

Conversions are subject to a contingent conversion feature.

The bonds are non-callable for five years. However, if the NBIC acquisition is not completed by June 8, 2018, Heritage can redeem the issue in its entirety at 101% of par plus accrued interest and 75% of any increase in the conversion value.

Holders can put the bonds at years five, 10 and 15 or upon a fundamental change at par.

Sutherland lists

Among recent deals, Sutherland Asset Management Corp.’s $115 million of 7% $25-par notes due 2023 were admitted to the New York Stock Exchange on Friday.

The ticker symbol is “SLDA.”

A trader saw the convertible baby bonds trading at $25.70.

The company’s stock was off 15 cents, or 1.01%, at $14.70.

The company priced $100 million of the notes on Aug. 4 with an initial conversion premium of 13%. On Aug. 9, the company said its $15 million over-allotment option had been exercised, bringing the total amount outstanding to $115 million.

Price talk was for a 6.75% to 7% yield and a 13% conversion premium.

Keefe Bruyette & Woods Inc. and JMP Securities LLC are the joint bookrunners.

From this week’s business, BioMarin Pharmaceutical Inc.’s 0.599% convertible notes due 2024 continued to be on the active side, though the paper remained under its issue price of 98.

A trader pegged the bonds in a 95.5 to 95.875 context.

The underlying shares, however, were firm for the day, gaining 44 cents to finish at $82.40.

The $450 million deal came with an initial conversion premium of 40%.

BofA Merrill Lynch led the deal, with J.P. Morgan Securities LLC and Goldman Sachs & Co. acting as joint bookrunners.

Mentioned in this article:

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Heritage Insurance Holdings Inc. NYSE: HRTG

Resource Capital Corp. NYSE: RSO

Sutherland Asset Management Corp. NYSE: SLD

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