By Abigail W. Adams
Portland, Me., Dec. 4 – The silence in the primary market over the past two weeks was broken Monday with Cleveland Cliffs Inc.’s announcement it will price $275 million in seven year convertible notes after market close Tuesday.
There were also two significant deals in the private market with similar structures to regular convertibles.
In a registered direct placement, Eros International plc priced $122.5 million in 0% convertible notes due 2020 with an initial conversion premium of 15%.
The notes were issued alongside warrants for 2 million in A ordinary shares and an additional offering of 10,340,426 in A ordinary shares. Eros stock tanked after the announcement.
In a private placement of convertible preferred stock, Carvana Co. agreed to issue $100 million of class A convertible preferred stock to yield 5.5% with an initial conversion premium of 10%.
It was another quiet day for the secondary market with only about $320.5 million in play by late afternoon, according to a market source.
General Cable Corp.’s 4.5% convertible notes due 2029 were in high demand Monday as investors responded to Italian cable manufacturer Prysmian SpA’s $3 billion buy-out of the company.
The notes gained 8 points and swapped hands 53 times by late afternoon, according to a market source. Only a few other convertible notes broke double digits in the number of trades during Monday’s session with none coming close to the volume amount by dollar.
In with the new
Cleveland Cliffs, the oldest and largest iron ore mining company in the United States, announced after market close its plans to price $275 million in seven-year convertible notes.
Price talk is for a coupon of 1.625% to 2.25% and an initial conversion premium of 32.5% to 37.5%, according to a market source.
BofA Merrill Lynch, Goldman Sachs & Co. LLC, Credit Suisse, Deutsche Bank Securities and Jefferies are acting as joint bookrunners for the public deal, which carries a $41.25 million greenshoe.
The convertible notes are being offered concurrently with an offering of $400 million in secured notes due 2024. Proceeds will be used to fund the opening of Cleveland Cliffs first hot briquetted iron production plant in Toledo, Ohio.
Cleveland Cliff stock closed the day at $6.75, a decrease of 1.03%.
In an offering that will not be listed on any securities exchanges or automated quotation system, Eros issued $122.5 million in three-year convertible notes to yield 0% with an initial conversion premium of 15% at a discounted offering price of $100 million.
The notes were issued alongside warrants for 2 million of the Mumbai, India-based Indian film company’s A ordinary shares with a strike price of $14.375, according to the deal’s prospectus.
The prospectus also included an offering of 10,340,426 A ordinary shares issuable upon conversion of the securities or otherwise.
Eros stock tanked after the announcement, closing the day at $11, a decrease of 13.73%.
In the convertible preferred stock world, online automotive retailer Carvana privately placed $100 million.
The class A convertible preferred stock will yield 5.5% with an initial conversion premium of 10%. Dundon Capital Partners LLC will buy the securities, which cannot be transferred for a period of six months from the closing date, according to an 8-K filing with the Securities and Exchange Commission.
Citigroup Global Markets Inc. and Wells Fargo Securities, LLC were capital markets advisers to Carvana for the deal. The deal is expected to generate $98.5 million in proceeds, which will be used to fund the on-line automotive retailer’s market expansion.
General Cable jumps
General Cable Corp.’s 4.5% convertible notes due 2029 were center stage in the secondary market after Prysmian’s $3 billion buy out of the Hyland Heights, Ky-based cable manufacturer was announced.
The notes accounted for almost $50 million of the about $320 million in trades by late afternoon, according to a market source. Trading activity far eclipsed all other convertible notes, including Intel’s 2.95% convertible notes due 2035 and 3.25% convertible notes due 2039.
Intel’s sister convertibles have largely dominated secondary market activity since Intel announced mid-November it would redeem its 2.95% notes on Dec. 18.
General Cable’s convertible notes gained about 8 points and were trading in a 103.45 to 105.625 range before closing the day at 104.982, according to Trace data. The notes were trading below par prior to the announcement and closed Friday at 97.
General Cable’s stock also skyrocketed on Monday, closing the day at $29.45, an increase of 35.09%. Prysmian plans to offer $30 a share for General Cable’s 75 million shares of common stock and 25 million of preferred stock.
General Cable currently has $429.5 million outstanding in the 4.5% notes.
The conversion rate as of Dec. 4 is 32.5784 not including General Cable’s quarterly dividend payment on Dec. 29 and 32.8141 including the dividend payment, according to the merger agreement.
Mentioned in this article:
| Eros International plc: | NYSE: EROS
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| Cleveland Cliffs Inc.: | NYSE:CLF
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| Carvana Co.: | NYSE: CVNA
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| General Cable Corp.: | NYSE: BGC
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