Morning Commentary: Royal Caribbean convertibles skyrocket on debut; Varex upsizes

By Abigail W. Adams

Portland, Me., June 5 – The convertibles primary market rounded out an active week with two deals totaling $1.175 billion pricing.

Royal Caribbean Cruises Ltd. priced $1 billion of three-year convertible notes and Varex Imaging Corp. sold an upsized $175 million of five-year convertible notes after the market close on Thursday.

The two offerings bring the weekly tally to $4.9 billion, which priced over six deals. Three of those deals were sized at $1 billion or above.

While new deal activity has been expected to slow down, the primary market has defied expectations.

The coming week is not expected to be as active as the previous weeks. However, deals remain in the pipeline, sources said.

Meanwhile, Royal Caribbean’s and Varex’s new paper hit the secondary space on a strong day for equities as stocks surged following a surprise decline in the unemployment rate.

Royal Caribbean’s new paper dominated activity in the secondary space with the notes skyrocketing on an outright basis.

However, new paper from Varex was changing hands at par in light volume.

Royal Caribbean active

Royal Caribbean priced $1 billion of three-year convertible notes after the market close on Thursday at par with a coupon of 4.25% and an initial conversion premium of 25%.

Pricing came at the rich end of tightened talk for a coupon of 4.25% to 4.5% and in line with talk for a fixed initial conversion premium of 25%, according to a market source.

Initial price talk was for a coupon of 5% to 5.5% and an initial conversion premium of 20% to 25%.

The deal was heard to have played to massive demand.

The demand followed the notes into the secondary space.

Royal Caribbean’s 4.25% notes dominated activity on Friday, accounting for $96 million of the $191 million on the tape about one hour into the session.

The notes were up 13 points outright to trade around 113 with stock up more than 15%, a source said.

Royal Caribbean stock was changing hands at $67.24, an increase of 16.64%, shortly before 11 a.m. ET.

Varex upsizes

Varex Imaging priced an upsized $175 million of five-year convertible notes after the market close on Thursday at par at the cheap end of talk with a coupon of 4% and an initial conversion premium of 25%.

Price talk was for a coupon of 3.5% to 4% and an initial conversion premium of 25% to 30%, according.

The greenshoe was also upsized to $25 million.

The initial size of the deal was $150 million with a greenshoe of $22.5 million.

The 4% notes were wrapped around par in light volume early Friday with stock up more than 3%.

Varex stock was changing hands at $17.34, an increase of 4.17%, shortly before 11 a.m. ET.

© 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.