Morning Commentary: Four new convertibles offerings totaling $510 million price

By Abigail W. Adams

Portland, Me., March 23 – Four new convertibles deals totaling $510 million made their market debut on Friday. However, the new paper was not active on the tape early in Friday’s session.

“The market is pretty quiet. Everyone’s in a little bit of shock from yesterday,” a market source said.

Accelerate Diagnostics Inc. priced $150 million of five-year convertible notes after the market close on Thursday at the cheap end of talk with a coupon of 2.5% and an initial conversion premium of 27.5%.

Price talk had been for a coupon of 2% to 2.5% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

Plug Power Inc. priced $100 million of five-year convertible notes prior to the market open on Friday at the cheap end of talk with a coupon of 5.5% and an initial conversion premium of 20%.

Price talk had been for a coupon of 5% to 5.5% and an initial conversion premium of 20% to 25%, according to a market source.

Both deals had borrow facilities, which sources said they had not seen in a long time.

Accelerate Diagnostics entered into prepaid forward stock purchase transactions for 1.9 million shares of common stock to facilitate hedge positions. Approximately $45.1 million of net proceeds from the convertible notes offering was used to cover the forward stock purchase transactions.

Plug Power purchased approximately $27.5 million of its common stock in prepaid forward stock purchase transactions. Plug Power also entered into capped call transactions with the initial purchasers of the notes with a cap price of $3.82, which represents a premium of 100% from the company’s perspective, according to a company news release.

Neither Accelerate Diagnostics nor Plug Power were seen trading early in Friday’s session.

The Plug Power deal was a tough one to get done, a market source said.

Blackstone Mortgage Trust, Inc. priced $220 million of 4.75% convertible senior notes due 2023 with a 15% initial conversion premium at an issue price of 98.5, according to a FWP filing with the Securities and Exchange Commission.

Pricing came cheaper than talk for an issue price of 99 to 99.5 and matched the fixed levels for a coupon of 4.75% and an initial conversion premium of 15%.

The original issue discount did not appear to eat into underwriters’ fees. Underwriting discounts and commissions were 0.875% with net proceeds expected to be $214.4 million, or $246.6 million if the greenshoe is exercised in full.

There was not a lot of buying activity of the 4.75% notes, a market source said. However, they were seen trading in the 98 to 99 range early in Friday’s session.

The deal was “pretty well placed,” a market source said. “It’s not really a flipper name. They’re a solid credit.”

In a small overnight deal, GSV Capital Corp. priced $40 million of five-year convertible notes prior to the market open on Friday with a coupon of 4.75% and an initial conversion premium of 20%, according to a company news release.

Proceeds will be used to repurchase or pay at maturity a portion of the company’s 5.25% convertible notes due Sept. 15, 2018. There is $64.18 million of the 5.25% notes outstanding, according to Trace data.

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