Convertibles quiet ahead of Thanksgiving; high-grade names trade lightly; DryShips adds

By Rebecca Melvin

New York, Nov. 20 - The convertible bond market was quiet on Tuesday with equities mixed in choppy trade and as many market players were already embarking on travel plans ahead of the Thanksgiving holiday Thursday.

There were a few investment-grade names that dominated the focus in convertibles in very light trading action. Both Intel Inc.'s convertibles were changing hands and were lower along with lower shares.

Goodrich Petroleum Corp.'s convertibles were up by about 0.5 point in active trade for that name to near 91 on lower shares.

DryShips Inc.'s 5% convertibles due 2014 continued their mild rebound, moving up to as high as 73.375 on Tuesday, but settling back down closer to 71.25. The convertibles of the Athens-based dry bulk ship and tanker operator dropped more than 10 points last week after poor quarterly results.

"I'm not going near that," a trader said of DryShips.

Regeneron Pharmaceuticals Inc. also traded fairly actively for that name at levels above double par as the underlying shares jumped 8%.

Encore Capital Group Inc.'s planned $100 million private offering of five-year convertibles was not getting a lot of attention from market players during the session, although pricing was expected after the market close. Encore shares were steady in early trading but slipped in the afternoon, closing down about 4% ahead of the bonds' expected pricing.

"Encore will trade tomorrow or it won't," a New York-based trader said predicting how the last session of the holiday-shortened week would go.

Volumes overall were very slim. In the equity markets, the Dow Jones industrial average dropped 7.45 points to 12,788.51, after surging 2.2% on Monday. Both the S&P 500 stock index and Nasdaq stock market added less than a point. The S&P closed at 1,387.81, and the Nasdaq closed at 2,916.68, after notching large gains Monday.

Encore Capital to price

Encore shares fell $1.11, or 4.2%, to $25.25 in average to higher volume on Tuesday, as the $100 million convertible deal of the San Diego-based consumer accounts receivable management firm was being marketed by joint bookrunners Morgan Stanley & Co. LLC, Barclays and Bank of America Merrill Lynch.

The Encore deal was talked to yield 2% to 2.5% with an initial conversion premium of 25% to 30%.

The five-year convertibles, which have a $15 million greenshoe, are non-callable with no puts.

Concurrently with the Rule 144A bond deal, Encore planned to enter into convertible note hedge and warrant transactions with initial purchasers of the bonds. The transactions will raise the effective initial conversion premium for the company.

Up to $25 million of the proceeds will be used to buy back shares from purchasers of the notes; about $61.5 million of the proceeds will be used to repay borrowings under the company's revolving credit facility; a portion of the proceeds will be used to pay for the convertible note hedge transaction, and the remainder of the proceeds will be for general corporate purposes.

Mentioned in this article:

DryShips Inc. Nasdaq: DRYS

Encore Capital Group Inc. Nasdaq: ECPG

Goodrich Petroleum Corp. NYSE: GDP

Intel Inc. Nasdaq: INTC

Regeneron Pharmaceuticals Inc. Nasdaq: REGN

© 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.