By Abigail W. Adams
Portland, Me., Jan. 9 – The New Year will soon see its second issuance of convertible preferred stock – although only a small issue after Sempra Energy’s giant offering deal opened up the 2018 market.
Wheeler Real Estate Investment Trust, Inc. plans to price a $25 million add on to its $25-par perpetual 8.75% series D cumulative convertible preferred stock after the market close on Wednesday, according to a market source.
Ladenburg Thalmann & Co. Inc. and BTIG, LLC are acting as joint bookrunners for the registered offering, which carries a $3.75 million greenshoe, according to the deal’s prospectus.
Trading volume continued to be low in the secondary convertible bond market with only $279 million on the tape by early afternoon, according to a market source. Volume picked up in the afternoon hours of Tuesday’s session with $429 million in play shortly before the market close.
Jazz Pharmaceuticals plc’s 1.875% convertible notes due 2021 made nominal gains during active trading alongside their underlying equity on Tuesday. The Ireland-based biopharmaceutical company’s stock has been on the rise since the launch of a clinical trial for a medication Jazz is partner in developing.
Ares Capital Corp.’s 4.75% convertible notes due 2018 and 3.75% convertible notes due 2022 saw heavy volume trading by dollar amount with little movement in trading price on Tuesday. The New York-based specialty finance company priced an offering of 4.25% seven-year senior straight notes on Monday.
Insulet Corp.’s 1.25% convertible notes due 2021 and 1.375% convertible notes due 2024 continued to see action during Tuesday’s session after both issues made large gains alongside their underlying equity on Monday.
After taking a dive Monday, GoPro Inc.’s 3.5% convertible notes due 2022 did not trade during Tuesday’s session, despite continued losses for the note’s underlying equity.
Traders who wanted to make a move on the 3.5% notes made it on Monday, a market source said.
“No one’s anxious to do anything because it hasn’t improved enough or shown enough signs of decay,” the source said.
Wheeler’s add-on
Wheeler is planning to price a $25 million add on to their 8.75% series D cumulative
convertible preferreds initially issued in September 2016 after market close Wednesday. The offering size is subject to change during the bookbuilding process.
The conversion price is $16.96, which is equivalent to an initial conversion premium of 20% from the original pricing of the preferreds, according to the preliminary prospectus.
The preferreds will form a single unit with the previously issued 8.75% series D cumulative convertible preferreds, which currently has 2,237,000 shares outstanding, or $55,925,000 liquidation preference, according to the prospectus.
The preferred stock will trade on Nasdaq under the symbol WHLRD.
The Virginia Beach, Va.-based real estate investment trust plans to use proceeds to partially finance the acquisition of the Janaf shopping center in Norfolk, Va., which is expected to cost $85.65 million.
Wheeler’s preferred stock was down 5.5% to $17.3495 at market close Tuesday. Wheeler’s common stock was down 3% to $8.07.
The deal will be the second preferred offering of the year after Sempra’s $1.5 billion mandatory preferred sale. Sempra said Tuesday that the greenshoe had been exercised on its deal, raising the size to $1,725,000,000.
High volume
Jazz Pharmaceutical’s 1.875% convertible notes due 2021 gained almost 2 points in active trading during Tuesday’s session to end the day at 103.382, according to Trace data. The notes were the most heavily traded of the day.
Jazz stock ended Tuesday’s session at $143.04, an increase of 4.77%. The biopharmaceutical company’s stock has been on the rise since Monday.
Jazz is involved in a strategic partnership with ImmunoGen Inc. for the development and commercialization of a medication to treat acute myeloid leukemia. Phase I of the clinical trial began on Friday.
Immunogen is also an issuer of convertible bonds, although the pharmaceutical company’s 4.5% convertible notes due 2021 have not traded since September when they solidified around 177.
Jazz also presented at J.P. Morgan’s annual health care conference Monday.
Ares Capital’s 4.75% and 3.75% convertible notes saw high volume by dollar amount trades during Tuesday’s session with little to no movement in trading price.
“They’re just clearing a space on the books,” a market source said of the trading activity.
The 4.75% notes continued to trade slightly above par and the 3.75% notes traded flush at 103. Ares Capital’s stock was $15.87, an increase of 0.19%, at market close.
Ares Capital priced $600 million of 4.25% seven-year senior notes at 99.621 to yield 4.311% on Monday. Proceeds will be used to pay down debt in the company’s revolving credit facility and funding facilities.
Insulet hits high
Insulet’s 1.375% notes due 2024 and 1.25% notes due 2021 continued to see action during Tuesday’s session after both notes and the company’s underlying equity surged on Monday.
The 1.375% notes hit a peak of 107.672 in early trading Tuesday, their highest value since they were issued in early November, according to Trace data. Insulet’s 1.25% notes firmed around 140 in active trading Tuesday after climbing to 142.75 during Monday’s session.
The 1.25% notes were previously trading in the 130 range.
Insulet stock was down on Tuesday, closing the day at $75.77, a decrease of 3.01%. However, the stock rose about 13.61% on Monday after Medicare Part D announced it would cover the Billerica, Mass-based medical device company’s proprietary OmniPod System for diabetes treatment.
GoPro holds
After tumbling more than 10 points on Monday, GoPro’s 3.5% convertible notes due 2022 did not trade during Tuesday’s session despite the continued decline of the company’s stock.
The 3.5% notes sank to 90 on Monday after the San Mateo, Calif.-based camera company released preliminary fourth quarter results.
The company’s revenue is expected to be $130 million less than its previous guidance. GoPro also announced it would exit the drone market and is exploring a possible sale with the help of J.P. Morgan.
Prior to Monday’s announcement, the last recorded trade of the sparsely traded notes was 104 at the end of November, according to Trace data.
GoPro stock was down another 5.95% to $6.17 at the market close Tuesday, after falling 12% on Monday. While the 3.5% convertible notes have a delta of 75, they did not trade on Tuesday, a market source said.
Those that wanted to make a move already did, the source said. Now, holders of the convertible notes are waiting to see what will happen.
“When the news is really bad, people will look to get out, but when it’s just moving with the stock, there’s no real reason to trade,” the source said.
Mentioned in this article:
| Wheeler Real Estate Investment Trust, Inc.: | Nasdaq: WHLR
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| Jazz Pharmaceuticals plc: | Nasdaq: JAZZ
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| ImmunoGen Inc.: Nasdaq: IMGN
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| Ares Capital Corp.: | NYSE: ARES
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| Insulet Corp.: | Nasdaq: PODD
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| GoPro Inc.: | Nasdaq: GPRO
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