Morning Commentary: Eagle Bulk Shipping on deck; DISH convertible notes in focus

By Abigail W. Adams

Portland, Me., July 24 – The dry spell in the convertibles primary market was broken on Wednesday with one new deal set to price after the market close.

Eagle Bulk Shipping Inc. plans to price $100 million of five-year convertible notes with price talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 25% to 30%, according to a market source.

Concurrently with the convertible notes offering, up to 8 million shares of the company’s common stock will be offered by selling shareholders through a lending arrangement with one of the initial purchasers of the notes.

The Stamford, Conn.-based shipping company has straight debt and term loans, making the bonds a risky investment, a market source said.

The company’s 8¼% senior notes due 2022 trade with a credit spread around 870 basis points.

One source placed assumptions for the deal at 1,200 bps over Libor and a 40% vol., which modeled about 3 points cheap.

While the company is a risky credit that emerged from bankruptcy in 2014, the new paper will benefit from the shortage of supply in the space, sources said.

Meanwhile, the secondary space was active on Wednesday with company news and earnings reports jumpstarting activity in the space.

There was about $103 million in reported volume about one hour into Wednesday’s session.

DISH Network Corp.’s convertible notes were in focus as details of T-Mobile’s and Sprint’s divestiture of assets to the satellite broadcaster emerged.

DISH’s 3.375% convertible notes due 2026 were changing hands around 100.875, according to a market source.

With more than $18 million in reported volume, the bonds were the most actively traded in the secondary space.

DISH’s 2.375% convertible notes due 2024 were changing hands around 94.125 with about $6 million on the tape a little over one hour into Wednesday’s session.

DISH stock was $42.52, a decrease of 1.71%, shortly before 11 a.m. ET.

The $5 billion deal will enable T-Mobile and Sprint to win regulatory approval for their merger and will enable DISH to launch a wireless network.

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