Deals from PRA, Capitala, ServiceNow added to pipeline; DISH little moved on Amazon news

By Stephanie N. Rotondo

Seattle, May 22 – A convertible bond trader said the market was “not exactly in a tizzy” over PRA Group Inc.’s early announcement of a new issue on Monday.

The trader noted that the company’s existing 3% convertible notes due 2020 were barely trading, though another source did see the paper adding about a point on the day.

Both sources placed the issue around 95.5.

Meanwhile, the company’s shares were down $2.70, or 7.31%, at $34.25.

The Norfolk, Va.-based acquirer of nonperforming loans said Monday that it would raise $300 million via a Rule 144A offering of convertible senior notes due 2023.

Price talk is for a 3.25% to 3.75% yield and an initial conversion premium of 32.5% to 37.5%.

BofA Merrill Lynch and SunTrust are the joint bookrunners.

The convertible notes are contingently convertible prior to March 1, 2023. After that date, the issue can be converted at any time.

The company can redeem the issue on or after June 1, 2021 at par plus accrued interest, but only if the stock hits a 130% price hurdle.

A portion of the proceeds will be used to repurchase between $30 million and $45 million of common stock concurrently with the pricing. The funds will also be used to repay debt outstanding under a North American revolving credit facility.

A second deal was added to the calendar early Monday, a $50 million offering of $25-par unsecured convertible notes due 2022 from Capitala Finance Corp.

Keefe Bruyette & Woods is running the deal.

Proceeds, along with funds from a recent sale of 6% $25-par notes due 2021, will be used to redeem all of the issuer’s outstanding 7.125% fixed-rate notes due 2021. Any remaining funds will be used to repay borrowings under a senior secured revolving credit agreement.

“It makes no sense,” a preferred stock trader said of the new issue. “They should have just done a larger baby bond deal and saved themselves a lot of money.”

After the close, the calendar saw yet another deal added to the pipeline, as ServiceNow Inc. said it was selling $750 million of five-year convertible notes via a Rule 144A offering.

The proceeds from that transaction will mostly be used to redeem at maturity – or repurchase prior to maturity – the company’s 0% convertible notes due 2018. ServiceNow also plans to repurchase up to $100 million in common stock.

Some funds will also be used to cover the cost of hedging transactions.

DISH edges up, Becton firms

Away from new issues, there was little activity – and only modest movement – in DISH Network Corp.’s convertible bonds on Monday, even as the company announced two new deals with Amazon.com.

One market source said the 3.375% convertible notes due 2026 were about ½ point higher, trading around 121.5. The 2.375% convertible notes due 2024 were also little changed, trading around 104.5.

DISH’s equity rose 27 cents to $63.80.

Last week, the convertibles gained ground in active trading on buzz that the Englewood, Colo.-based satellite TV services provider was close to inking a deal with Amazon in regards to its hefty inventory of wireless spectrum.

Alas, that was not either of the deals announced on Monday.

First, DISH said it planned to allow its digital video recording set-top box to work directly with Amazon’s personal assistant, Alexa. Secondly, DISH’s Anywhere app users can access Amazon FireTV products.

Elsewhere, Becton, Dickinson & Co.’s 6.125% series A mandatory convertible preferred stock (NYSE: BDXA) was quite active on the day, with about 1.3 million shares being exchanged.

The mandatory convertibles ended the session up 8 cents at $52.45.

Mentioned in this article:

Becton, Dickinson & Co. NYSE: BDX

Capital Finance Corp. Nasdaq: CPTA

DISH Network Corp. Nasdaq: DISH

PRA Group Inc. Nasdaq: PRAA

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