Barclays synthetic, Vertex convertible offerings play to strong demand; Xerox drops

By Abigail W. Adams

Portland, Me., April 23 – The convertibles primary market returned to action after a three-week hiatus with two deals slated to price after the market close on Tuesday.

Vertex Inc. plans to price $250 million of five-year convertible notes and Barclays Bank plc plans to price $350 million of five-year cash-settled equity-linked notes tied to Eli Lilly Co. after the market close on Tuesday.

The deals looked attractive and played to strong demand with the market hungry for new paper, sources said.

“There’s been zero issuance to compete with,” a source said.

Meanwhile, it was another quiet yet firm day in the secondary space as equity indexes logged another session of strong gains.

The Dow Jones industrial average closed Tuesday up 264 points, or 0.69%, the S&P 500 index closed up 1.2%, the Nasdaq Composite index closed up 1.59% and the Russell 2000 index closed up 1.79%.

There was $495 million in reported volume about one hour before the market close with high-grade names again driving volume.

Investment-grade issues improved alongside the broader market with Rexford Industrial Realty, LP’s two tranches of exchangeable notes (Baa2/BBB+/BBB+) gaining strength.

Earnings-related volatility also continued to spark activity.

Xerox Holdings Corp.’s 3.75% convertible notes due 2030 (B1/BB) were in focus with the notes under pressure as stock dropped on a large earnings miss.

Vertex eyed

Vertex plans to price $250 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 0.75% to 1.25% and an initial conversion premium of 27.5% to 32.5%.

The deal was heard to be in the market with assumptions of 275 basis points over SOFR and a 42% vol.

Using those assumptions, the deal looked about 1.75 points cheap at the midpoint of talk, a source said.

The offering played to strong demand and was heard to be 2x oversubscribed early in the session.

Demand was strongest at the midpoint of talk.

The company is a new name to the convertibles market with the offering new money entering the space.

The deal was a hailed as a positive sign for the market, especially with refinancings expected to dominate the new issuance of 2024.

Synthetic on deck

Barclays plans to price $350 million of five-year cash-settled equity-linked notes tied to Eli Lilly after the market close on Tuesday with price talk for a fixed coupon of 0.25% and a fixed conversion premium of 31%, according to a market source.

While synthetic offerings tend to play to a limited investor base, the deal was heard to be in demand with the offering an opportunity to play Eli Lilly, a source said.

Rexford improves

Rexford’s two tranches of exchangeable notes improved on Tuesday after hitting fresh outright lows the previous week amid the heaviness in the market.

The 4.125% exchangeable notes due 2029 were among the top volume movers of the session.

The notes gained 1 point outright with stock up over 1%.

They were changing hands at 97.25 versus a stock price of $44.15 in the late afternoon, according to a market source.

There was $25 million in reported volume.

While less active, the 4.375% convertible notes due 2027 were also up about 1 point to trade at 98 in the late afternoon.

Rexford’s stock traded to a low of $42.93 and a high of $44.43 before closing at $43.73, up 1.67%.

Xerox’s earnings

Xerox’s 3.75% convertible notes due 2030 returned to focus on Tuesday with the notes dropping outright alongside stock after a large earnings miss.

The 3.75% convertible notes sank 7 points outright with stock off 9%.

They were trading at 90 versus a stock price of $14.60 in the late afternoon, according to a market source.

There was $19 million in reported volume.

Xerox’s stock traded to a low of $14.04 and a high of $15.20 before closing at $14.76, down 10.08%.

Stock sank after a large earnings miss with the printing company reporting earnings per share of 6 cents versus the 35 cents expected.

Revenue was $1.5 billion versus the $1.57 billion expected.

Mentioned in this article:

Eli Lilly Co. NYSE: LLY

Rexford Industrial Realty Inc. NYSE: REXR

Vertex Inc. Nasdaq: VERX

Xerox Holdings Corp. Nasdaq: XRX

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.