Royal Caribbean, Nova convertible offerings in demand, talk tightens; Gossamer tanks

By Abigail W. Adams

Portland, Me., Oct. 13 – The convertibles primary market returned to action on Tuesday with two new deals set to price after the market close.

Royal Caribbean Cruises Ltd. plans to price $500 million of three-year convertible notes and Nova plans to price $150 million of five-year convertible notes after the market close on Tuesday.

The deals saw enormous demand during bookbuilding with talk on both offerings tightening.

Meanwhile, there was an uptick of activity in the secondary space with $122 million in reported volume a little over one hour into Tuesday’s session and $458 million on the tape heading into the market close.

Extra Space Storage Inc.’s 3.125% convertible notes due 2035 were among the top traded issues of Tuesday’s session with the notes now freely callable.

While volume was relatively light, Gossamer Bio Inc.’s 5% convertible notes due 2027 were Tuesday’s ‘disaster du jour’ with the notes tanking on an outright and dollar-neutral basis following disappointing results from a clinical trial.

Royal Caribbean eyed

Royal Caribbean plans to price $500 million of three-year convertible notes after the market close on Tuesday.

The deal was met with heavy demand and price talk tightened to a coupon of 2.875% to 3.375% and an initial conversion premium of 30% to 35%, a market source said.

Initial price talk was for a coupon of 3.375% to 3.875% and an initial conversion premium of 25% to 30%.

Underwriters were marketing the deal with assumptions of a credit spread of 1,000 basis points over Libor and a 40% vol., sources said.

Using those assumptions, the deal looked about 2 points cheap at the midpoint of revised price talk, a source said.

Sources pegged the deal between 4.25 points and 4.375 points cheap at the midpoint of initial talk.

However, some felt the cruise line operator deserved a wider credit spread.

The deal is pricing concurrently with a secondary offering of $500 million shares.

The offering is Royal Caribbean’s second convertible notes offering.

The Miami-based cruise line operator priced a $1.15 billion issue of 4.25% convertible notes due 2023 in June.

The 4.25% convertible notes were taking a beating as stock tanked on the heels of the new offering.

The 4.25% notes dropped about 10 points outright with stock off more than 10% during Tuesday’s session.

They were changing hands at 111.75 in light volume.

The notes contracted about 1 point dollar-neutral, a source said.

Royal Caribbean’s stock traded to a high of $64.64 and a low of $60.03 before closing the day at $60.61, a decrease of 13.20%.

Nova in focus

Nova, a Rehovot, Israel-based semiconductor parts supplier, plans to price $150 million of five-year convertible notes after the market close on Tuesday.

The offering was also in demand with price talk tightening to a fixed coupon of 0% and a fixed initial conversion premium of 27.5%, according to a market source.

Initial price talk was for a fixed coupon of 0% and an initial conversion premium of 20% to 25%.

Underwriters were marketing the deal with assumptions of 400 bps over Libor and a 35% vol., sources said.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of initial talk.

Nova is a first-time convertible notes issuer.

With the success of Fiverr International Ltd.’s 0% convertible notes due 2025, which is based in Tel-Aviv, Nova may be following suit.

Extra Space active

Extra Space Storage’s 3.125% convertible notes due 2035 were among the top traded issues of Tuesday’s session with the notes now freely callable.

The 3.125% notes were changing hands at 123.5 versus a stock price of $112.39 in the late afternoon, according to a market source.

There was $12 million on the tape heading into the market close.

Extra Space’s stock traded to a high of $114.40 and a low of $110.64 before closing the day at $113.15, a decrease of 0.67%.

The 3.125% notes became freely callable at par on Oct. 5.

Gossamer Bio tanks

Gossamer Bio’s 5% convertible notes due 2027 were the ‘disaster du jour’ of Tuesday’s session, a market source said.

The notes dropped more than 13 points outright as stock plummeted almost 30% after disappointing clinical results, a source said.

The 5% notes were seen changing hands at 89 in the late afternoon.

They were contracted 3 points dollar-neutral, a source said.

Gossamer Bio’s stock traded to a high of $10.74 and a low of $8.22 before closing the day at $10.09, a decrease of 25.75%.

The biotech company missed its end results in a clinical trial for an asthma treatment.

Mentioned in this article:

Extra Space Storage Inc. NYSE: EXR

Gossamer Bio Inc. Nasdaq: GOSS

Nova Nasdaq: NVMI

Royal Caribbean Cruises Ltd. NYSE: RCL

© 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.