Morning Commentary: Redfin convertible offering eyed; Royal Caribbean trades below par

By Abigail W. Adams

Portland, Me., Oct. 15 – As volatility roiled equity markets, the convertibles primary market worked to churn out a new offering.

Redfin Corp. plans to price $525 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 0% to 0.5% and an initial conversion premium of 32.5% to 37.5%.

Underwriters were marketing the deal with assumptions of 400 basis points over Libor and a 40% vol.

Using those assumptions, the deal looked 2.14 points cheap at the midpoint of talk, a source said.

With Redfin a well-known name in the convertibles space and proceeds to be used to take out part of an outstanding issue, the deal is expected to do well, sources said.

Redfin’s offering is the latest refinancing deal in the convertibles space.

Proceeds will be used to repurchase a portion of the company’s 1.75% convertible notes due 2023 in privately negotiated transactions.

There were several trades of the 1.75% convertible notes at 191.5 late Wednesday, which may be the repurchase price, a source said.

Meanwhile, trading volume was light early in the session as equity markets plummeted on higher-than-expected unemployment numbers and hope for a pre-election stimulus deal squashed.

The Dow Jones industrial average was down 230 points, the S&P 500 index was down 0.97% and the Nasdaq composite was down 1.39% shortly before 11 a.m. ET.

There was $52 million in reported volume about one hour into the session.

Royal Caribbean Cruises Ltd.’s 2.875% convertible notes due 2023 slipped below par early in Thursday’s session.

The 2.875% notes were seen changing hands at 99.25 with stock off more than 2%.

Royal Caribbean stock was $58.16, a decrease of 2.94%, shortly before 11 a.m. ET.

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