Morning Commentary: KBR convertibles hit the market; Ribbon Communications, HC2 on tap

By Abigail W. Adams

Portland, Me., Nov. 13 – The convertibles primary market started the week off strongly with one new deal pricing prior to the market open and two more on deck.

KBR Inc. priced $350 million of five-year convertible notes prior to the market open on Tuesday. The notes were active in the secondary space and trading at a slight premium on swap, a market source said.

Ribbon Communications Inc. plans to price $150 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

HC2 Holdings Inc. is on deck with plans to price $55 million of four-year convertible notes in conjunction with a downsized offering of $470 million of three-year senior notes.

The convertibles deal is part of a restructured senior notes offering that was initially launched on Oct. 22 as a $535 million five-year senior notes deal.

The convertible bonds are expected to allocate on Wednesday, according to a market source.

HC2 Holdings stock was under pressure early Tuesday, dropping more than 22% to $3.93.

KBR prices

KBR priced $350 million of five-year convertible notes at the cheap end of talk prior to the market open on Tuesday 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%.

The new paper was active in the secondary space with the notes trading at a slight premium on swap, a market source said.

The notes were trading at 100.625 on hedge and were largely wrapped around par on an outright basis, a market source said.

The deal was marketed with a credit spread of 450 basis points over Libor and a 35% vol., which was seen as rich to fair value at the midpoint of talk, sources said.

A previous story published in the Nov. 13 edition of the Prospect News Convertibles Daily included incorrect assumption figures for KBR’s convertible notes offering.

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