Morning Commentary: Eagle Bulk skyrockets; Turner Brands eyed; Tesla in focus

By Abigail W. Adams

Portland, Me., July 25 – Thursday opened with new convertible paper hitting the secondary space and more expected to price after the market close.

Eagle Bulk Shipping Inc. priced $100 million of five-year convertible notes prior to the market open, and Turning Point Brands Inc. plans to price $125 million of five-year convertible notes after the market close on Thursday.

Eagle Bulk’s new paper priced cheap and skyrocketed in active trading in the secondary space.

Turning Point’s deal looked cheap and will add some welcome diversity to the convertibles universe, sources said.

The new paper and earnings surprises jumpstarted activity in the secondary space with more than $186 million in reported volume about one hour into the session.

Tesla Inc.’s convertible notes were in focus as stock tanked after its second-quarter earnings report.

Eagle Bulk skyrockets

Eagle Bulk priced $100 million of five-year convertible notes prior to the market open on Thursday at par with a coupon of 5% and an initial conversion premium of 25%.

Pricing came wider than initial price talk for a coupon of 4.25% to 4.75% and at the cheap end of talk for an initial conversion premium of 25% to 30%, according to a market source.

The deal was wall-crossed, sources said.

Primary shareholders Oaktree Capital Management LP agreed to acquire $45.5 million of the notes and Golden Tree Asset Management LP agreed to acquire $23.6 million, according to a company news release.

Oaktree became part owner of the company during Eagle Bulk’s restructuring in 2014 and may have been looking for an opportunity to swap out its equity in the company for bonds, a market source said.

Concurrently with the convertible notes offering, up to 3,582,880 shares of the company’s common stock was offered by selling shareholders through a lending arrangement.

The new paper modeled up to 8 points cheap at the midpoint of initial price talk, sources said.

It skyrocketed in the secondary space.

The notes were changing hands around 106.5 early in the session. There were more than $14 million of the bonds on the tape.

Eagle Bulk stock was $98.19, a decrease of 0.03%, shortly before 11 a.m. ET.

Turning Point eyed

Turning Point Brands 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.

The deal is being marketed with assumptions of 600 basis points over Libor and a 40% vol., which modeled almost 3 points cheap at the midpoint of talk, sources said.

While small, the deal from the Louisville, Ky.-based provider of tobacco products and adult consumer alternatives should be a welcome addition to the convertibles universe.

With the convertibles universe so tech heavy, having more paper from consumer discretionary companies will add needed diversity to the space, a market source said.

Tesla in focus

Tesla’s convertible notes were in focus and trading down on an outright basis as stock tanked after a disappointing earnings report.

Tesla’s 1.25% convertible notes due 2021 traded down to 96.5 early in the session with about $4 million on the tape.

The 2.375% convertible notes dropped to 99.25 with $5 million on the tape.

Tesla’s newly priced 2% convertible notes due 2024 were the most active of the tranches with the notes dropping to 98.

More than $16 million of the bonds changed hands less than an hour into Thursday’s session.

Tesla stock was $231, a decrease of 12.79%, shortly before 11 a.m. ET.

Stock tanked following a disappointing second-quarter earnings report.

Tesla reported a loss per share of $1.12 versus the loss of 40 cents expected by analysts.

Revenue was $6.35 billion versus the $6.41 billion expected.

© 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.