Morning Commentary: World Kinect convertible notes offering on tap; Lantheus active

By Abigail W. Adams

Portland, Me., June 21 – The convertibles primary market returned to action on Wednesday with one offering set to price after the market close.

World Kinect Corp. plans to price $250 million of five-year convertible notes after the market close on Wednesday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 25% to 30%.

The deal was heard to be in the market with assumptions of 400 basis points over SOFR and a 35% vol.

Using those assumptions, the deal looked 1.5 points cheap at the midpoint of talk, a source said.

The Miami-based energy management company is a new name to the convertibles market with proceeds to be partially used to pay outstanding amounts under its revolving credit facility.

“It’s a brand-new name for the asset class,” a source said. “That’s always a good thing.”

With the deal modeling cheap and the company’s financials solid, the offering is expected to do well.

The deal comes as the window of time for new issuance before the second quarter draws to a close continues to narrow.

With equities starting to pull back from their recent rally and Fed officials signaling more rate hikes may be in store, sources expect companies to start green lighting some backlogged offerings.

However, the timing remains unclear.

The new deal comes on another red open for equities with the Dow Jones industrial average was down 85 points, or 0.25%, the S&P 500 index was down 0.63%, the Nasdaq Composite index was down 1.25% and the Russell 2000 index was down 0.17% shortly before 11 a.m. ET.

Activity in the secondary space remained muted with $57 million in reported volume about one hour into the session.

Lantheus Holdings Inc.’s 2.625% convertible notes due 2027, an off-the-run issue that rarely trades in volume, was among the top traded names early in the session.

The 2.625% notes were lower alongside stock.

They were changing hands at 138.75 versus a stock price of $92.85 early in the session, according to a market source.

There was $6 million in reported volume.

Lantheus’ stock was trading at $92.32, a decrease of 0.65%.

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