Morning Commentary: GEO exchangeables eyed; MicroStrategy, Expedia notes active early

By Abigail W. Adams

Portland, Me., Feb. 18 – After the onslaught of new paper early in the week, the convertibles primary market had one deal on the active calendar.

GEO Corrections Holdings Inc. plans to price $200 million of five-year notes exchangeable for the GEO Group Inc.’s shares after the market close on Thursday with price talk for a coupon of 6% to 6.5% and an initial exchange premium of 20% to 22.5%, according to a market source.

The deal was being marketed with assumptions of 1,300 basis points over Libor and a 35% vol.

Using those assumptions, the deal looked 15.25 points cheap at the midpoint of talk.

In contrast to the recent trend, GEO’s exchangeable notes carried optically attractive terms.

However, the correctional facilities-focused real estate investment trust is from an enormously controversial sector, a source said.

While the sector is controversial, private correctional facilities do not necessarily fall into the sin stock category and have been popular with investors before, another source said.

Given the cheapness of the deal, it is expected to do well.

However, the deal is mostly being marketed to high-yield accounts.

Meanwhile, the secondary space saw an active start to the day with recent deals again dominating the tape.

There was $122 million in reported volume about one hour into the session with new paper from Expedia Group Inc. and MicroStrategy Inc. accounting for the lion’s share of trading activity.

Expedia’s 0% convertible notes due 2026 continued to trade on a 105-handle as stock again traded off.

The notes were changing hands at 105.125 early in the session, according to a market source.

There was more than $16 million in reported volume.

Expedia’s stock traded down to $152.06, a decrease of 1.29%, shortly before 11 a.m. ET.

MicroStrategy’s new 0% convertible notes due 2027 traded up to 102.375 early in the session, according to a market source.

There was about $11 million in reported volume early in the session.

Stock remained under pressure and traded down to $913.07, a decrease of 3.05%, shortly before 11 a.m. ET.

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