Peabody Energy convertibles on tap; BeautyHealth jumps, Palo Alto active, John Bean off

By Abigail W. Adams

Portland, Me., Feb. 23 – The convertibles primary market returned to action on Wednesday with one deal on deck despite the heaviness in the market.

Peabody Energy Corp. plans to price $250 million of six-year convertible notes after the market close on Thursday with price talk for a coupon of 3% to 3.5% and an initial conversion premium of 30% to 35%, according to a market source.

Goldman Sachs & Co. LLC and Jefferies LLC are bookrunners for the Rule 144A offering, which carries a greenshoe of $37.5 million.

The deal marks the first since NCL Corp. Ltd. priced its $435 million offering of 2.5% notes due 2027 exchangeable for Norwegian Cruise stock on Feb. 10.

Meanwhile, it was another quiet session in the convertibles secondary market as volatility continued to roil equities with the Ukraine preparing for war.

After launching the day in positive territory, indexes were driven deep into the red with selling pressure intensifying into the close.

The Dow Jones industrial average closed the day down 465 points, or 1.38%, the S&P 500 index closed down 1.84%, the Nasdaq Composite closed down 2.57% and the Russell 2000 index closed down 1.82%.

There was $65 million in reported trading volume about one hour into the session and $427 million on the tape about one hour before the market close.

While the secondary space has been heavy, trading activity has been muted with buyers and sellers at a standstill.

There has been no rush to sell, and opportunistic buyers are waiting for better prices.

“People are looking for cheap merchandise, but things aren’t cheap yet,” a source said.

Earnings-related volatility continued to be the driver of trading activity in the space.

Beauty Health Co.’s (BeautyHealth) 1.25% convertible notes due 2026 were in focus with the notes making gains on an outright and dollar-neutral basis as stock soared following a large earnings beat.

Palo Alto Networks Inc.’s 0.375% convertible notes due 2025 were active alongside stock following their earnings report.

John Bean Technologies Corp.’s 0.25% convertible notes due 2026 sank outright and saw a nominal dollar-neutral contraction as stock tanked post earnings.

BeautyHealth gains

While a heavy day for the market, BeautyHealth’s 1.25% convertible notes jumped alongside stock after a large earnings beat.

The 1.25% notes rose almost 8 points outright with stock up more than 35% in intraday activity.

They were changing hands at 91.5 versus a stock price of $16.60 early in the session, a source said.

The notes traded as high as 92.625 in intraday activity but returned to a 91-handle heading into the close.

The notes gained 1.5 points on swap.

“Those were a winner,” a source said.

BeautyHealth’s stock traded to a low of $14.85 and a high of $18.18 before closing the day at $16.54, an increase of 28.82%.

Stock jumped following the Long Beach, Calif.-based skin care solutions company’s fourth-quarter earnings report.

The company surprised analysts with per-share earnings of 1 cent, versus expectations for no earnings, and revenue of $77.89 million versus expectations for revenue of $70.90 million.

Palo Alto active

Palo Alto’s 0.375% convertible notes due 2025 were also active as stock jumped in early trading following earnings.

The 0.375% notes were changing hands at 174 versus a stock price of $506.02 early in the session.

However, they came in as stock gave back much of its gains and were changing hands at 166.5 in the late afternoon.

The notes are equity-sensitive and were largely moving in line with stock, a source said.

Palo Alto’s stock traded to a high of $511.36 and a low of $472.03 before closing the day at $477.61, an increase of 0.44%.

While stock came in alongside the broader market as the session progressed, it launched the day with strong gains following an earnings beat and upbeat guidance.

The cyber-security firm reported earnings per share of $1.74 versus analyst expectations for earnings of $1.65. Revenue was $1.31 billion versus expectations for revenue of $1.28 billion.

John Bean tanks

John Bean’s 0.25% convertible notes due 2026 sank outright and saw a nominal dollar-neutral contraction as stock tanked following earnings.

The 0.25% notes fell 10 points outright with stock down almost 20%.

The notes were changing hands at 92.25 in the late afternoon, their lowest level since pricing.

The notes contracted 0.25 point to 0.5 point dollar-neutral on the move down.

John Bean’s stock traded to a high of $119 and a low of $103.39 before closing the day at $103.77, a decrease of 19.38%.

Stock tanked after the food processing machinery and airport equipment maker reported a large earnings miss.

The company reported earnings per share of 92 cents versus analyst expectations for earnings of $1.13.

Revenue was $497.60 million versus the $519.39 million expected.

Mentioned in this article:

Beauty Health Co. Nasdaq: SKIN

John Bean Technologies Corp. NYSE: JBT

Palo Alto Networks Inc. Nasdaq: PANW

Peabody Energy Corp. NYSE: BTU

© 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.