Morning Commentary: Two Harbors brings upsized deal, trades just over par; SL Green paper active

By Stephanie N. Rotondo

Seattle, Jan. 13 – The convertible bond market kicked off Friday trading with another new issue, this one a $250 million sale of 6.25% convertible senior notes due 2022 from Two Harbors Investment Corp.

The yield came at the cheap end the 6% to 6.25% price talk.

A trader saw the paper in a par to 100.125 range in early dealings.

The conversion price is $10.00 per share, representing a conversion premium of approximately 13.5% and a conversion rate of 100 shares per each $1,000 of notes.

A trader noted that there is “a huge dividend on the common [stock],” about 10%. “That’s why [they did the] small premium.”

The stock (NYSE: TWO) was off 12 cents, or 1.36%, at $8.69 at mid-morning.

Credit Suisse Securities (USA) LLC ran the books.

Proceeds will be used to fund the business and investment activities of the company and its subsidiaries, which may include acquisitions, and for general corporate purposes.

Aside from Friday’s new deal, there wasn’t much action in the week’s other new issues, according to a trader.

“There’s no volume,” he said, adding that Monday is a holiday, so desks were already starting to empty.

In secondary dealings, a trader saw SL Green Realty Corp.’s 3% convertible notes due 2017 moving around, placing the paper at 138 bid, 138.25 offered.

The trader said the debt was busy “because they are maturing” on Oct. 15. At the current levels, the convertibles trade “probably at parity, or just a small premium.”

The underlying equity (NYSE: SLG) was up 29 cents at $106.46.

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