Morning Commentary: Ventas convertibles flat in early trading; Bread Financial soars

By Abigail W. Adams

Portland, Me., June 9 – It was an active morning in the convertibles secondary space as $1.025 billion in new supply made its aftermarket debut.

Bread Financial Holdings Inc. priced $275 million of five-year convertible notes and Ventas Realty, LP priced an upsized $750 million of three-year notes exchangeable for parent company Ventas Inc.’s common shares after the market close on Thursday.

The notes played to heavy demand during book building with both offerings well oversubscribed.

They hit the secondary space on another mixed open for equities with the Dow Jones industrial average up 89 points, or 0.28%, the S&P 500 index up 0.40%, the Nasdaq Composite index up 0.44% and the Russell 2000 index down 0.04% shortly before 11 a.m. ET.

There was $159 million in reported convertibles trading volume about one hour into the session with new paper accounting for more than two-thirds of the activity.

The new paper followed different trajectories in the aftermarket with Ventas’ exchangeable notes largely flat while Bread Financial made strong outright and dollar-neutral gains.

Bread Financial surges

Bread Financial priced $275 million of five-year convertible notes after the market close on Thursday at par at the rich end of talk with a coupon of 4.25% and an initial conversion premium of 25%.

Price talk was for a coupon of 4.25% to 4.75% and an initial conversion premium of 20% to 25%.

The new paper played to heavy demand during book building with the offering more than 3x oversubscribed.

The strong demand followed the notes into the aftermarket where they soared on debut.

The 4.25% convertible notes were changing hands at 102.375 versus a stock price of $30.82 early in the session.

They rose more than 2 points dollar-neutral, a source said.

There was $58 million in reported volume.

Bread Financial’s stock wavered between gains and losses early in the session and was changing hands $30.44, a decrease of 0.98%, shortly before 11 a.m. ET.

Ventas flat

Ventas priced an upsized $750 million offering of three-year exchangeable notes after the market close on Thursday at par at the cheap end of talk with a coupon of 3.75% and an initial exchange premium of 22.5%.

Price talk was for a coupon of 3.25% to 3.75% and an initial exchange premium of 22.5% to 27.5%.

The greenshoe was also upsized to $112.5 million.

The initial size of the offering was $500 million with a greenshoe of $75 million.

The deal was heavily oversubscribed during book building but fell flat in the aftermarket.

The notes were trading at 100.125 versus a stock price of $44.65 early in the session, according to a market source.

There was $66 million in reported volume.

Ventas’ stock was seen at $44.95, an increase of 0.45%, shortly before 11 a.m. ET.

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