New convertible deals from BlackRock Capital, Liberty Expedia trade well; Yahoo! gains

By Stephanie N. Rotondo

Seattle, June 8 – Convertible bond market players were focusing on two new deals that began trading on Thursday.

Late Wednesday, BlackRock Capital Investment Corp. priced a $125 million offering of 5% five-year convertible notes with an initial conversion premium of 10%.

The deal came at the cheap end of yield talk and in line with the conversion premium talk.

The issue inched up over par upon the break, though the company’s stock stumbled.

“There’s a lot of leverage in that one because of the low strike price,” the trader said.

Meanwhile, Liberty Expedia Holdings Inc. brought a $350 million Rule 144A offering of 1% senior debentures exchangeable for Expedia Inc. stock early Thursday.

The deal came with an initial conversion premium of 32.5%, at the rich end of talk.

Like BlackRock, the Liberty Expedia paper fared well in trading. Unlike BlackRock, the underlying equity trended higher.

Away from the new issues, Yahoo! Inc.’s 0% convertible notes due 2018 got a boost after e-commerce company Alibaba said during its annual investor day that it expected sales to increase 45% to 49% this year.

Yahoo! owns a 15% stake in that company.

Tesla Inc.’s convertibles were also on the rise, following along with the company’s stock.

For its part, the shares have been running up since the Palo Alto, Calif.-based car maker’s own investor day earlier in the week.

A trader called the 1.25% convertible notes due 2021 up 2 to 2.25 points, placing the paper in a 115.5 to 115.75 context. The 0.25% convertible notes due 2019 were pegged in a 114.25 to 114.5 range, a gain of 1.5 to 1.75 points.

The trader noted that the 0.25% convertibles were “a little bit higher earlier” in the day.

As for the stock, it was up $10.35, or 2.88%, at $370.00.

BlackRock trades around par

BlackRock Capital priced $125 million of 5% convertible notes due 2022 with an initial conversion premium of 10% late Wednesday.

Come Thursday’s session, a trader saw the notes in a 100.75 to 100.875 context toward the end of the day.

Earlier in the day, the bonds were seen in a range of 100.5 to 100.75.

The company’s shares dipped after pricing, falling 14 cents, or 1.82%, to $7.55.

The conversion rate is 118.2173 shares per each $1,000 of notes, or $8.46 a share.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, BMO Capital Markets, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and HSBC Securities ran the books.

The convertible notes are non-callable until Dec. 15, 2021. After that, the issue can be called at par plus accrued interest and a make-whole premium.

Proceeds will be used to repay certain outstanding debt, which may include repaying outstanding borrowings under a credit facility, and for other general corporate purposes, which include investing in portfolio companies in accordance with BlackRock’s investment objective and strategies.

BlackRock is a New York-based business development company.

Liberty Expedia deal pops

Liberty Expedia Holdings sold $350 million of 1% exchangeable senior debentures due 2047 on Thursday.

The bonds are exchangeable for Expedia stock at a conversion price of $193.93, equaling an initial conversion rate of 5.1566 shares and an initial conversion premium of 32.5%.

The deal did well upon the break.

In late afternoon trading, a New York-based sellside source saw the issue trading quite actively in a 103 to 103.5 context.

Earlier in the day, a trader pegged the paper at 102 to 102.375.

As for the underlying Expedia equity, it flipped back and forth between negative and positive during the session but eventually finished up $2.86, or 1.95%, at $149.22.

BofA Merrill Lynch, J.P. Morgan Securities LLC and UBS Securities LLC were the joint bookrunners.

Holders can put the paper on or after July 5, 2022. The company also has the option to redeem the issue after five years.

Liberty plans to use proceeds to repay up to $350 million outstanding under a margin loan facility. Any remaining funds will be used for general corporate purposes, including to pay interest on the debentures.

Liberty Expedia is an Englewood, Colo.-based company whose primary assets include its stake in Expedia Inc. and Vitalize LLC. Expedia is a Bellevue, Wash.-based online travel company.

Invacare on deck

Invacare Corp. was expected to price a $100 million offering of five-year convertible senior notes after the close on Thursday.

However, details had not emerged as of 6 p.m. ET.

The company’s existing 5% convertible notes due 2021 were in play during the session.

One market source saw the bonds opening around 101, which was off abut 13 points from the last round-lot trades in late May. The paper hit highs with a 104 handle, though the notes eventually settled in closer to 101.5, the source said.

Another source deemed the debt down about 8 points to around 101.5.

Invacare’s equity dropped $1.30, or 9.59%, to $12.25.

Price talk on the new issue is for a 4.5% to 5% yield and an initial conversion premium of 27.5% to 32.5%.

Goldman Sachs & Co. is the bookrunner on the Rule 144A deal.

The notes are contingently convertible prior to Dec. 1, 2021 but are convertible at any time after that date.

The issue is non-callable.

Proceeds will be used, in part, to cover hedging transactions. The remaining funds will be used for working capital and general corporate purposes, which may include funding portions of the company’s ongoing turnaround and addressing potential risks and contingencies.

Invacare is an Elyria, Ohio-based manufacturer and distributor of medical equipment used in non-acute care settings.

Yahoo! boosted by Alibaba

Yahoo!’s 0% convertibles gained ground on Thursday after Alibaba said it expected sales growth of 45% to 49% this year.

Yahoo! owns a 15% stake in the company.

A trader called the convertibles up “4.5 points or so,” seeing the bonds at 111.5 bid, 111.75 offered.

At mid-morning, the trader placed the paper at 110.375 bid, 110.625 offered.

At another desk, the notes were seen around 112.5, a gain of over 5.5 points.

Yahoo!’s stock also jumped on the announcement, rising $5.16, or 10.21%, to $55.71.

Notably, Alibaba – a Chinese e-commerce company – saw its revenue improve 56% last year alone.

Mentioned in this article:

BlackRock Capital Investment Corp. Nasdaq: BKCC

Expedia Inc. Nasdaq: EXPE

Liberty Expedia Holdings Inc. Nasdaq: LEXEA

Invacare Corp. NYSE: IVC

Tesla Inc. Nasdaq: TSLA

Yahoo! Inc. Nasdaq: YHOO

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