Morning Commentary: Meritor’s new $300 million convertibles price, trade up; older issues also rise

By Stephanie N. Rotondo

Seattle, Sept. 20 – The convertible bond market had a new issue to push around early Wednesday.

Late Tuesday, Meritor Inc. sold $300 million of 3.25% convertible senior unsecured notes due 2037 with an initial conversion premium of 60%.

The Rule 144A deal came in line with initial price talk.

On the break, a trader said the bonds were trading in a 103 to 103.375 range at mid-morning.

However, the company’s stock (NYSE: MTOR) was weaker, falling 49 cents, or 1.92%, to $25.08.

BNP Paribas Securities Corp., BofA Merrill Lynch, J.P. Morgan Securities LLC, RBC Capital Markets LLC and PNC Capital Markets LLC ran the books.

Meritor intends to use the proceeds to privately repurchase $118.6 million of its 4% convertible notes due 2027 and $116.7 million of its 7.875% convertible notes due 2026.

Those issues were rather active in early Wednesday trading.

The 4% convertibles were trading at 116.148, according to Trace data. About $22 million of the notes had been exchanged, all at that price.

The convertibles had been around 114 on Monday.

As for the 7.875% notes, about $16 million of those had traded as of mid-morning, all at 230.488. That compared to 216.875 on Monday.

Meritor is a Troy, Mich.-based supplier of drivetrain, mobility, braking and aftermarket solutions for commercial vehicle and industrial markets.

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