Redwood Trust plans new six-year issue; Great Ajax announces add-on; secondary follows stocks

By Stephanie N. Rotondo

Seattle, Aug. 14 – The convertible bond primary market showed no signs of letting up on Monday, as two more deals were added to the calendar.

The issues came on the heels of a steady deal flow in the previous week, in which nearly $1.4 billion was raised from seven transactions.

Redwood Trust Inc. kicked things off, announcing a $225 million underwritten public offering of convertible senior notes due 2023.

Price talk is for a yield of 4.25% to 4.75% and an initial conversion premium of 10% to 15%, according to a market source.

J.P. Morgan Securities LLC and Wells Fargo Securities LLC are running the books.

The notes will be non-callable for life. Holders can convert the paper at any time prior to maturity.

The bonds also become putable upon a fundamental change.

The company intends to use the proceeds to repurchase or redeem upon maturity its 4.625% convertible notes due 2018.

The company’s stock was initially higher in early trading but closed down 32 cents, or 1.9%, at $16.51.

After the market closed, Great Ajax Corp. announced that it was reopening its 7.25% $25-par convertible senior notes due 2024 (NYSE: AJXA).

Ahead of the announcement, the notes had moved up 16 cents to $26.06. The underlying equity was likewise higher, adding 20 cents, or 1.4%, to close at $14.48.

The company initially sold $76.25 million of the notes on April 20. On April 25, the company said its $11.25 million over-allotment option had been exercised, bringing the total amount outstanding to $87.5 million.

The issue came with an initial conversion premium of 17.5%.

Raymond James & Associates Inc. and JMP Securities LLC are the bookrunners.

Secondary follows stock moves

As for secondary trading, volume was again limited amid a lack of fresh news to push anything around.

However, the names that were on the active side appeared to be tracking with their equity counterparts.

For instance, Lumentum Holdings Inc.’s 0.25% convertible notes due 2024 firmed to a 113.5 to 113.75 context, which compared to previous levels around 112.5. The company’s stock was also better, rising $2.15, or 4.14%, to $54.10.

Ctrip.com International Ltd.’s 1% convertible notes due 2020 and 1.99% convertible notes due 2025 finished lower on the day, just as its shares declined over 2.5%.

The 1% convertibles were seen opening at 113.25, which was down from 114.75 as of Friday. By the bell, the paper had fallen to levels just south of 113.

The 1.99% convertibles were meantime seen ending just shy of 121, versus 122.625 previously.

In the convertible preferred arena, Becton Dickinson & Co.’s 6.125% series A mandatory convertible preferred stock (NYSE: BDXA) was active, trading almost 940,000 times during the session. The issue finished up 11 cents at $55.86.

Becton’s shares were also better, gaining $1.41 to close at $201.77.

Mentioned in this article:

Becton Dickinson & Co. NYSE: BDX

Ctrip.com International Ltd. Nasdaq: CTRP

Great Ajax Corp. NYSE: AJX

Lumentum Holdings Inc. Nasdaq: LITE

Redwood Trust Inc. NYSE: RWT

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