Morning Commentary: Northern Oil and Gas convertible notes jump on trading debut

By Abigail W. Adams

Portland, Me., Oct. 12 – It was an active morning in the convertibles secondary space as new paper from Northern Oil and Gas Inc. made its aftermarket debut.

Northern Oil priced an upsized $435 million of seven-year convertible notes after the market close on Tuesday at par at the midpoint of talk with a coupon of 3.625% and an initial conversion premium of 27.5%.

The greenshoe was also upsized to $65 million.

The initial size of the offering was $350 million with a greenshoe of $50 million.

The deal played to solid demand during bookbuilding and made a strong aftermarket debut.

The 3.625% notes “jumped out of the gate,” a source said.

They traded up to 102.5 prior to the market open and were marked at 102.25 bid, 102.75 offered with stock up early in the session.

The notes expanded about 2 points dollar-neutral, a source said.

Northern Oil’s stock was changing hands at $30.02, an increase of 0.50%, shortly before 11 a.m. ET.

The new paper hit the secondary space as volatility continued to whipsaw equities with indexes mixed after a red open.

The Dow Jones industrial average was up 156 points, or 0.54%, the S&P 500 index was up 0.22%, the Nasdaq Composite index was down 0.02% and the Russell 2000 index was down 0.92% shortly before 11 a.m. ET.

Markets “can’t get a break,” a source said, with everyone “crushed” amid the downturn in equities.

However, demand for new paper has remained strong, which is a good sign for the market.

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