Fiat Chrysler weakens after early strength; IGI trades around issue; energy space slides

By Rebecca Melvin

New York, Dec. 11 – Fiat Chrysler Automobiles NV’s new mandatory convertibles closed at par 11/16 to 15/16 compared to the $100 issue price, according to a syndicate source.

On a delta-neutral basis, the new mandatories were down a point, based on a stock price of $11.00, which is where a concurrent stock offering priced. But the new issue had done better earlier in the day, and many hedged players did better, sources said.

“Some of them actually made 2 points, depending on where they got their short off,” a syndicate source said of hedged players.

The new IGI Laboratories Inc.’s 3.75% convertibles closed “wrapped around par,” a syndicate source said. Shares of the Buena, N.J.-based generic pharmaceutical company fell 23 cents, or 2.6%, to $8.66 compared to where the new convertibles priced.

Fiat priced $2.5 billion of the two-year securities at the cheap end of talked terms, and IGI priced $125 million of the five-year notes at the cheap end of coupon talk and midpoint of premium talk. Both new issues traded actively, sources said.

Meanwhile, as part of an exchange offer, AmTrust Financial Services Inc. issued $158.3 million of new 2.75% convertibles due 2044 and privately placed a further $76 million of the convertibles at a price of 90.

The exchanged bonds plus 2.7 million shares of AmTrust common stock were issued in a swap for the lion’s share of AmTrust’s in-the-money 5.5% convertibles.

Elsewhere, energy names – and the overall convertibles market – were still in the doldrums, with crude oil prices dropping again. West Texas Intermediate crude for January delivery closed down $1.31, or 2.2%, to $59.63.

Energy XXI Ltd.’s 3% convertibles due 2018 traded down to 34.75, which was sharply lower from 42 on Wednesday and 49 earlier this week, according to Trace data.

Market tone was downbeat: “people just want the year to be over,” a New York-based trader said.

Fiat Chrysler mega deal fades

Fiat Chrysler’s 7.875% mandatory convertibles traded up out of the gate. One trader quoted the paper at plus 1.5 points.

But the new Fiat mandatories closed the session at 100.6875 bid, 100.9375 offered versus the closing share price of $11.18, which was up 18 cents from the $11.00 issue price of a concurrent stock offering.

On a swap basis of 6.8 per, the new securities were in about a point, a syndicate source said.

They were trading better earlier in the day, and a block had come for sale later in the day.

Fiat Chrysler also issued common shares at $11.00 each, which was a discount to the $11.47 share closing price on Wednesday.

“A lot of the hedge guys were able to get the stock off much higher. They were hedging up yesterday off of the close or better than the close,” a source said.

If hedged against a share price of $11.47, participants “actually made 2 points. A lot of the hedge players set up prior to today,” the source said. Overall, hedged participants did well, he said.

Allocations of the $2.5 billion in mandatory securities were described as “pretty balanced,” between hedged players and outright participants.

Pricing of the mandatory came at the cheap end of talked terms for a 7.125% to 7.875% coupon and a 17.5% to 22.5% premium.

Fiat also priced $957 million of common stock, or 87 million shares at $11.00 each.

Goldman Sachs & Co., J.P. Morgan Securities LLC, Barclays, UBS Securities LLC, Citigroup Global Markets Inc., BofA Merrill Lynch and Morgan Stanley & Co. LLC were the joint bookrunning managers of the mandatory, which has a $375 million greenshoe.

The Italian automaker, now based in London, said its reference shareholder, Exor SpA, bought $886 million of the mandatory to preserve its ownership of common shares.

The offerings are being made in conjunction with the company’s planned spinoff of Ferrari SpA, and investors participating in the offerings will be entitled to participate in the spinoff to receive shares of Ferrari.

New IGI trades at issue

IGI’s new 3.75% convertibles were seen intraday at 99.5 to 100 with the underlying shares down about 1.7%.

The new paper ended at 99.75 bid, 100.25 offered with shares down 23 cents, or 2.6% at $8.66.

IGI priced $125 million of five-year convertible senior notes after the market close on Wednesday to yield 3.75% with an initial conversion premium of 27%.

There is a greenshoe for $18.75 million for the deal that was sold via joint bookrunners Deutsche Bank Securities Inc. and JPMorgan.

The notes will be non-callable until Dec. 19. 2017 and then provisionally callable if shares exceed 150% of the conversion price.

The securities have takeover and dividend protection.

Proceeds are earmarked for general corporate purposes, including for capital expenditures and potential future acquisitions and strategic transactions.

AmTrust exchange eyed

The new AmTrust 2.75% convertibles due 2044 were issued in exchange for $131.9 million of AmTrust’s existing 5.5% convertible senior notes due 2021, which will be retired, while the privately placed portion was sold for cash which will be used for general corporate purposes.

The new 2.75% convertibles traded at 90, according to Trace data, and were said to be trading in line. The 90 level matched the private placement price.

After the exchange, $68.1 million of the AmTrust 5.5% convertibles remain outstanding. They didn’t seem to be trading on Thursday, according to one New York-based trader, who added that he expected they would go higher as stock borrow frees up.

AmTrust shares were up 60 cents, or 1%, at $58.37 at midday, but they closed lower by 32 cents, or 0.6%, at $57.45.

Mentioned in this article:

AmTrust Financial Services Inc. Nasdaq: AFSI

Energy XXI Ltd. Nasdaq: EXXI

Fiat Chrysler Automobiles NV Nasdaq: FCAU

IGI Laboratories Inc. NYSE: IG

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