Morning Commentary: Vroom, Cracker Barrel convertibles hit aftermarket, expand on debut

By Abigail W. Adams

Portland, Me., June 16 – The convertibles secondary space was active early Wednesday as two new deals made their aftermarket debut.

Cracker Barrel Old Country Store Inc. priced $275 million of five-year convertible notes and Vroom Inc. priced an upsized $550 million of five-year convertible notes after the market close on Tuesday.

While Vroom’s new notes initially struggled on an outright basis, they improved alongside stock as the session progressed and saw a large dollar-neutral expansion.

Cracker Barrel’s new notes were posting gains on an outright and dollar-neutral basis.

Vroom up on hedge

Vroom priced an upsized $550 million of five-year convertible notes after the market close on Tuesday at par at the rich end of talk with a coupon of 0.75% and an initial conversion premium of 40%.

Price talk was for a coupon of 0.75% to 1.25% and an initial conversion premium of 35% to 40%, according to a market source.

The initial size of the offering was $500 million.

The deal was heard to be heavily oversubscribed. However, the notes initially struggled out of the gate with the notes briefly dipping below par with stock down.

The notes later rallied alongside stock as the session progressed and were marked at 100.5 bid, 101 offered about one hour into the session.

There was good buying of the notes around the par to 100.5 level, a source said.

While the notes initially struggled outright, they saw a large dollar-neutral expansion and pushed out about 2.5 points on hedge, the source said.

Vroom’s stock traded as low as $38.66 after the opening bell but improved to trade at $40.12, an increase of 0.28%, shortly before 11 a.m. ET.

Cracker Barrel gains

Cracker Barrel priced $275 million of five-year convertible notes after the market close on Tuesday at par with a coupon of 0.625% and an initial conversion premium of 25%, according to a company news release.

Pricing came at the midpoint of talk for a coupon of 0.375% to 0.875% and at the cheap end of talk for an initial conversion premium of 25% to 30%, according to a market source.

The deal was the latest offering to come as a “happy meal” with $35 million of net proceeds used to repurchase 232,543 shares of common stock.

The notes were performing well on an outright and dollar-neutral basis.

They were marked at 100.625 bid, 101.125 offered with stock unchanged early in the session.

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

Cracker Barrel’s stock was changing hands at $150.66, an increase of 0.1% 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.