Morning Commentary: Convertibles primary prices $1.77 billion; Wolfspeed, indie trade up

By Abigail W. Adams

Portland, Me., Nov. 17 – The convertibles primary market took a breather early Thursday after pricing $1.765 billion over three deals on Wednesday, bringing the weekly tally to $3.265 billion over five deals.

Wolfspeed Inc. priced an upsized $1.525 billion of seven-year convertible notes, indie Semiconductor Inc. priced an upsized $140 million of five-year convertible notes and Brookdale Senior Living Inc. sold $125 million of $50-par three-year tangible equity units after the market close on Wednesday.

The past week marks the second highest volume week of the year for new deal activity, ranking behind only the Sept. 11 week when $4.115 billion priced in three deals.

The convertible notes played to strong demand during bookbuilding with the market flush with cash after some large-scale redemptions and hunger for new paper, sources said.

The convertible notes were putting in a strong performance out of the gate despite continued selling in equities.

“Not bad for a bear market day,” a source said.

However, Brookdale’s equity units were struggling outright with its equity under pressure alongside broader markets.

The Dow Jones industrial average was down 272 points, or 0.81%, the S&P 500 index was down 1.17%, the Nasdaq Composite index was down 1.12% and the Russell 2000 index was down 1.27% shortly before 11 a.m. ET.

Wolfspeed jumps

Wolfspeed priced an upsized $1.525 billion of seven-year convertible notes after the market close on Wednesday at par at the midpoint of talk with a coupon of 1.875% and an initial conversion premium of 35%, according to a market source and a company news release.

Price talk was for a coupon of 1.625% to 2.125% and an initial conversion premium of 32.5% to 37.5%.

The greenshoe was also upsized to $225 million.

The initial size of the offering was $1.3 billion with a greenshoe of $200 million.

The deal played to heavy demand with BorgWarner, a Durham, N.C.-based automotive supplier, taking down $500 million of the offering as part of a strategic partnership that entitles it to purchase $650 million of devices annually.

The new 1.875% notes jumped out of the gate.

They were changing hands at 102.25 versus a stock price of $88.18 early in the session.

They expanded 1.5 points to 1.75 points dollar-neutral, a source said.

Wolfspeed’s stock wavered between gains and losses at the open but were changing hands at $88.68, an increase of 0.70%, shortly before 11 a.m. ET.

indie upsizes

indie Semiconductor priced an upsized $140 million of five-year convertible notes after the market close on Wednesday at par with a coupon of 4.5% and an initial conversion premium of 30%.

Pricing came at the midpoint of talk for a coupon of 4.25% to 4.75% and at the rich end of talk for an initial conversion premium of 25% to 30%, according to a market source.

The greenshoe was also upsized to $20 million.

The initial size of the offering was $125 million with a greenshoe of $18.75 million.

While volume in the small issue was light, the new paper also saw a strong start with the 4.5% notes marked at 101 bid early in the session, a source said.

indie’s stock also wavered between gains and losses at the open and were unchanged at $6.66 shortly before 11 a.m. ET.

Brookdale struggles

Brookdale priced $125 million of $50-par three-year tangible equity units after the market close on Wednesday at par with a yield of 7% and an initial conversion premium of 17.5%.

Pricing came at the midpoint of talk for a yield of 6.75% to 7.25% and at the rich end of talk for a conversion premium of 12.5% to 17.5%.

The new paper struggled outright out of the gate.

The securities were marked at $46.25 bid, $46.75 offered in early trade, a source said.

Brookdale’s stock was trading at $3, a decrease of 8.38%, 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.