Turning Point convertibles on tap; Eagle Bulk eyed; DISH expands; Teradyne active

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 and another on deck for Thursday.

Turning Point Brands Inc. plans to price $125 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 2% to 2.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Cowen Inc. is bookrunner for the Rule 144A deal, which carries a greenshoe of $18.75 million.

Eagle Bulk Shipping Inc. plans to price $100 million of five-year convertible notes after the market close on Wednesday. The deal looked cheap, but the credit was dicey, sources said.

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

DISH Network Corp.’s convertible notes were making gains on a dollar-neutral basis as stock traded off after details of T-Mobile’s and Sprint’s divestiture of assets to the satellite broadcaster emerged.

Teradyne Inc.’s 1.25% convertible notes due 2023 saw high-volume activity as stock popped after a second-quarter earnings beat. However, the notes were mostly moving in line dollar-neutral.

NXP Semiconductors NV’s soon-to-mature 1% convertible notes due Dec. 1, 2019 were also active and trading up alongside stock with the broader semiconductor sector strong on Wednesday.

Eagle eyed

Eagle Bulk Shipping plans to price $100 million of five-year convertible notes after the market close on Wednesday 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.

Underwriters were marketing the deal with a credit spread of 900 basis points over Libor and a 40% vol., according to a market source.

Using those assumptions, the deal was almost 8 points cheap assuming a normal borrow on the stock.

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

The Stamford, Conn.-based shipping company has a small market cap of $328 million.

It also 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 bps.

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.

The Rule 144A and Regulation S deal was heard to be wall-crossed, a market source said.

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 selling shareholder most likely became an owner of the company during its restructuring process in 2014, sources said.

DISH expands

DISH Network’s convertible notes were in focus and making gains on a dollar-neutral basis 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 early in the session, according to a market source.

The notes climbed up to about 101.375 by the mid-afternoon.

DISH’s 2.375% convertible notes due 2024 were trading around 94.125 early in the session and climbed up to 94.5 by the mid-afternoon.

Both notes were expanded about 0.75 point dollar-neutral, a market source said.

DISH stock traded off on the news and closed the day at $41.56, a decrease of 3.93%.

News broke late Tuesday that DISH agreed to pay $5 billion for wireless assets from T-Mobile and Sprint, including $1.5 billion for prepaid mobile businesses and $3.5 billion for spectrum, Bloomberg reported.

The deal is expected to allow T-Mobile and Sprint to win regulatory approval for their merger, which was reportedly hampered by the lack of a fourth wireless carrier.

It will also enable DISH to expand its satellite broadcast business by launching a wireless network.

Teradyne’s earnings

Teradyne’s 1.25% convertible notes due 2023 were active and making large gains on an outright basis as stock popped following an earnings beat.

The notes rose more than 26 points outright to 186.625 by the mid-afternoon.

The notes were largely moving in line on a dollar-neutral basis, a market source said. They may have expanded about 0.25 point.

Teradyne stock skyrocketed on Wednesday. Stock traded as high as $58.61 and closed the day at $57.94, an increase of 20.48%.

Stock popped after Teradyne beat on both the top and bottom lines in its second-quarter earnings report.

Teradyne reported earnings of 66 cents per share, which beat analyst expectations for earnings of 61 cents per share.

Revenue was $564.2 million versus analyst expectations of revenue of $536.7 million.

NXP active

NXP Semiconductors’ soon-to-mature 1% convertible notes due Dec. 1, 2019 were gaining alongside stock as the broader semiconductor sector benefitted from better-than-anticipated earnings.

The 1% convertible notes were up about 1 point outright to trade north of 108.

NXP stock traded as high as $106.25 and closed the day at $105.50, an increase of 4.52%.

Stock was on the rise alongside the broader semiconductor sector as industry peers such as Teradyne and Texas Instruments reported earnings beats.

NXP is slated to report earnings on July 29.

Mentioned in this article:

Eagle Bulk Shipping Inc. Nasdaq: EGLE

DISH Network Corp. Nasdaq: DISH

NXP Semiconductors NV Nasdaq: NXPI

Teradyne Inc. Nasdaq: TER

Turning Point Brands Inc. NYSE: TPB

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