Arbor Realty, Encore Capital, CalAmp hit the market; Redfin convertible notes on tap

By Abigail W. Adams

Portland, Me., July 18 – The convertibles space opened Wednesday with $480 million in new paper hitting the market and another $125 million set to price after the market close.

Arbor Realty Trust Inc. priced an upsized $130 million of three-year convertible notes, CalAmp Corp. priced $200 million of seven-year convertible notes and Encore Capital Europe Finance Ltd., a subsidiary of Encore Capital Group Inc., sold $150 million of five-year exchangeable notes after the market close on Tuesday.

Each deal priced at the cheap end of talk and had mixed results in secondary trading.

While the secondary market worked to digest the new paper entering the space, one more deal is set to price after the market close on Wednesday.

Redfin Corp. plans to sell $125 million of five-year convertible notes concurrently with a 3.5 million common stock offering. The deal modeled cheap, a market source said.

Arbor below par

Arbor Realty priced an upsized $130 million of three-year convertible notes at the cheap end of talk with a coupon of 5.25% and an initial conversion premium of 10%.

Price talk had been for a coupon of 4.75% to 5.25% and an initial conversion premium at 10% to 15%, according to a market source.

The initial size of the deal had been for $110 million.

The notes were seen trading below par early in the session.

They were at 98.5 bid, 99.5 offered versus a stock price of $11.30, a market source said. The notes continued to trade below par into the afternoon.

Arbor, a serial issuer of convertible notes, intends to use a portion of the proceeds to exchange its 5.375% convertible notes due 2020 for cash and stock.

The notes were last seen trading on Tuesday between 119 and 120, according to Trace data.

They were quoted down 4 points on Wednesday to 121.88 from 126.10, according to a market source.

Arbor stock closed Wednesday at $11.22, a decrease of 3.94%.

CalAmp at par

CalAmp priced $200 million of seven-year convertible notes after the market close on Tuesday at the cheap end of talk with a coupon of 2% and an initial conversion premium of 30%.

Price talk had been for a coupon of 1.5% to 2% and an initial conversion premium of 30% to 35%.

The notes were seen at 99.75 bid, 100.25 offered early in the session and continued to trade around par into the afternoon.

The notes were seen up about 0.25 point dollar-neutral, a market source said.

CalAmp intends to use $50 million of the proceeds from the new convertible notes offering to repurchase a portion of the company’s outstanding 1.625% convertible notes due 2020 in privately negotiated transactions. The 1.625% convertible notes had $172.5 million outstanding.

They appeared to be repurchased for 107.42, a source said.

CalAmp stock closed Wednesday at $23.31, a decrease of 1.44%.

Encore outperforms

Encore Capital sold $150 million of five-year exchangeable notes after the market close on Tuesday at the cheap end of talk with a coupon of 4.5% and an initial exchange premium of 25%.

Price talk had been for a coupon of 4% to 4.5% and an initial exchange premium of 25% to 30%.

Of the three deals to hit the market on Wednesday, Encore’s 4.5% exchangeable notes were the strongest performer in secondary trading.

The 4.5% notes were seen at 101 bid, 101.5 offered early Wednesday, a market source said. They continued to trade up and were seen at 101.75 in the afternoon.

“It was very well received,” a market source said.

Encore stock closed Wednesday at $36.35, an increase of 1.82%.

Redfin looks cheap

Redfin plans to sell $125 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.75% to 2.25% and an initial conversion premium of 27.5% to 32.5%.

The convertible notes will price alongside a concurrent offering of 3.5 million shares of common stock.

The deal is being marketed with a credit spread of 350 basis points over Libor and a 38% vol., according to a market source.

The deal looked to be about 3.83 points cheap at the midpoint of talk, the source said.

Mentioned in this article:

Arbor Realty Trust Inc. NYSE: ABR

CalAmp Corp. Nasdaq: CAMP

Encore Capital Group Inc. Nasdaq: ECPG

Redfin Corp. Nasdaq: RDFN

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