Morning Commentary: Convertibles floodgate opens; Wolfspeed, Brookdale, indie on deck

By Abigail W. Adams

Portland, Me., Nov. 16 – The convertibles primary market stood poised for one of the highest volume weeks of the year with $1.55 billion set to price over three deals after the market close and a $1 billion offering making its aftermarket debut.

Wolfspeed Inc. plans to price $1.3 billion of seven-year convertible notes, indie Semiconductor Inc. plans to price $125 million of five-year convertible notes and Brookdale Senior Living Inc. plans to price $125 million of $50-par three-year tangible equity units after the market close on Wednesday.

Meanwhile, Carnival Corp.’s $1 billion of five-year convertible notes made their aftermarket debut.

The new paper was performing well on an outright and dollar-neutral basis despite an ugly day for equities as a better-than-expected consumer confidence report again dashed hopes for a fed pivot.

Wolfspeed on tap

Wolfspeed plans to price $1.3 billion of seven-year convertible notes after the market close on Wednesday with price talk for a coupon of 1.625% to 2.125% and an initial conversion premium of 32.5% to 37.5%.

The deal was heard to be in the market with assumptions of a 375 basis points credit spread and a 42% vol., according to a market source.

Using those assumptions, the deal looked about 2.5 points cheap at the midpoint of talk.

The deal will most likely be oversubscribed with BorgWarner appearing to be taking down almost one-third of the offering size, sources said.

BorgWarner, a Durham, N.C.-based automotive supplier, announced in a separate press release a strategic partnership with Wolfspeed where it would invest $500 million in the financing transaction entitling it to purchase $650 million of devices annually.

“That’s a good way to secure your supply chain,” a source said.

indie in focus

indie Semiconductor plans to price $125 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 25% to 30%, according to a market source.

Brookdale eyed

Brookdale Senior Living plans to price $125 million of $50-par three-year tangible equity units after the market close on Wednesday with price talk for a yield of 6.75% to 7.25% and a conversion premium of 12.5% to 17.5%, according to a market source.

The deal was heard to be in the market with assumptions of a 600 bps credit spread and a 45% to 40% vol. screw.

Carnival expands

Carnival priced $1 billion of five-year convertible notes that made their aftermarket debut after the market close on Tuesday at the cheap end of talk with a coupon of 5.75% and an initial conversion premium of 20%.

Price talk was for a coupon of 5.25% to 5.75% and an initial conversion premium of 20% to 25%.

The low conversion premium accounted for an anticipated 10% drop in stock sparked by the overnight offering with the real conversion premium most likely around 35% based on afterhours trading Tuesday, a source said.

The new paper was performing well despite an ugly day for equities.

The new notes were changing hands at 100.375 on an outright basis with stock down 14% early in the session.

The convertibles expanded about 0.5 point dollar-neutral, a source said.

Carnival’s stock was trading at $9.58, a decrease of 14.13%, shortly after 11 a.m. ET.

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