Norwegian, Colony to price notes; American Airlines trades actively again; NextEra busy

By Rebecca Melvin

New York, July 16 – Norwegian Cruise Line Holdings Ltd. launched $250 million of five-year exchangeable notes early Thursday that were seen worth 107.76 at the midpoint of price talk, according to a market source.

The cruise line deal was being talked at a coupon of 5.75% to 6.25% and an initial exchange premium of 20% to 25%. The assumptions used in the valuation was for a credit spread of 1,700 basis points over Libor and a 45% vol.

Colony Capital Inc. was also expected to price an offering of notes after the market close on Thursday. The real estate investment trust launched its $200 million deal of five-year exchangeable senior notes late Wednesday and it was being talked with a 6.25% to 6.75% coupon and 20% to 25% initial exchange premium. A valuation on this deal wasn’t heard by Prospect News’ deadline.

The common stock of both companies fell hard in Thursday’s session. Norwegian Cruise Line fell $2.89, or 15.6%, to $15.61, and Colony shares fell 54 cents, or 22.6%, to $1.84. Both were among the session’s biggest declining stocks.

In the international primary market, Japan’s Sosei Group Corp. announced it priced ¥16 billion five-year convertible bonds with a 0.5% coupon and a 15% initial exchange premium, according to a company release.

The company concurrently priced a ¥5.06 billion issue of shares, or 3,301,400 shares at ¥1,595 per share.

The biopharmaceutical group, based in Tokyo with research facilities in Cambridge, England, intends to use proceeds to fund strategic growth initiatives including an acquisition, investments in novel technologies, expansion of its drug candidate discovery and early development into new target classes, and in licensing late-stage clinical assets to develop for the Japanese market.

In secondary market dealings, American Airlines Group Inc.’s 6.5% convertible notes due 2025 retraced some of Wednesday’s gains. The issue has traded actively this week and was up strongly on Wednesday. They fell back to between 90 to 91 from as high as 95.

American Airlines’ stock fell 99 cents, or 7.4%, to $12.45.

American and JetBlue Airways Corp. announced a strategic partnership on Thursday under which the airlines will be able to sell seats on each other’s airplanes and allow passengers to use their frequent flyer miles with either airline. The agreement reflects efforts underway by the travel industry to adapt to the changing marketplace resulting from the coronavirus pandemic.

Southwest Airlines Co.’s 1.25% convertibles due 2025 dropped back a couple of points to 122, from 124 to 125 on Wednesday, as shares of the Dallas-based airline slipped $1.54, or 4.3%, to $34.21.

Among other names in trade was Zscaler Inc. Its 0.125% convertible due 2025 traded down a point or two to around 107 as shares of the cyber security company slipped $2.69, or 2.2%, to $117.15.

The most active convertibles in the mandatory space were the NextEra Energy Inc.’s 5.279% equity units due 2023 and the NextEra 4.872% equity units, according to a market source.

NextEra Energy Inc. shares rose $9.38, or 3.6%, to $268.38.

Norwegian Cruise Line, Colony to price

The Norwegian dal was expected to price after the market close and was being sold concurrently with a $250 million secondary offering of 13.5 million shares and $675 million of senior secured straight notes due 2026.

It plans to sell the deal with a coupon of 5.75% to 6.25% and an initial exchange premium of 20% to 25%. That talk is identical to a convertible that the cruise line priced earlier this year.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC are the bookrunners of the Rule 144A deal. The proceeds of both issues will be used to repay a $675 million senior secured revolving credit facility and to pay any related transaction fees and expenses, with the remainder of proceeds earmarked for general corporate purposes.

The Colony $200 million exchangeable has a $30 million greenshoe. The Los-Angeles-based REIT plans to use the proceeds of the notes to redeem its 3.875% convertible senior notes due 2021 prior to maturity or to repay the 2021 notes at maturity with remaining proceeds earmarked for general corporate purposes.

Mentioned in this article:

American Airlines Group Inc. Nasdaq: AAL

Colony Capital Inc. NYSE: CLNY

NextEra Energy Inc. NYSE: NEE

Norwegian Cruise Line Holdings Ltd. Nasdaq: NCLH

Sosei Group Corp. Toyko: 4565

Southwest Airlines Co. NYSE: LUV

Zscaler Inc. Nasdaq: ZS

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