Convertibles weaken with stocks; Ares Capital’s new issue trades sub-par; Greenbrier on tap

By Stephanie N. Rotondo

Seattle, Jan. 30 – As the common stock markets were waning on Monday, the convertible bond market was sitting on the sidelines.

“The [stock] market is down 220 [points] now,” a trader said at mid-morning. “Here’s the volatility that everybody wanted and they’re just sitting on their hands.”

The Dow Jones industrial average dropped from the historic 20,000-mark that it reached last week, as investors reacted poorly to the new U.S. president’s executive order to ban certain immigrants travelling from certain predominantly Muslim countries. Protests swept the nation over the weekend in response, and several companies expressed concerns about how it might impact their workers.

Convertible bonds were trending lower in line with the broader market, though overall trading was limited.

Ares Capital Corp.’s $350 million of 3.75% convertible notes due 2022 – a deal priced Tuesday – were seen falling under par to lows around 99, according to one bond trader.

Earlier in the session, the convertibles were quoted at 99.125 bid, 99.375 offered.

“That coupon can’t hold them up,” a trader said.

The underlying shares were down a nickel at $16.94.

The deal came upsized from $250 million. The coupon was at the cheap end of the 3.25% to 3.75% yield talk and the 15% to 20% conversion premium talk.

As for the upcoming calendar, the Greenbrier Cos. Inc. said it was selling $175 million of convertible senior notes due 2024.

The convertibles will be sold via a Rule 144A offering.

There is a $26.25 million greenshoe.

Proceeds will be used for general corporate purposes, including working capital, capital expenditures, acquisitions of or investments in complementary businesses and products or repayment or repurchase of some debt.

Timing and talk was not available as of press time.

Ahead of pricing, the company’s shares were off $1.25, or 2.68%, at $45.35.

Mentioned in this article:

Ares Capital Corp. Nasdaq: ARCC

The Greenbrier Cos. Inc. NYSE: GBX

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