Convertibles primary prices $3.35 billion in six deals; new paper floods secondary space

By Abigail W. Adams

Portland, Me., May 8 – New paper flooded the convertibles secondary space on Friday after the primary market priced $3.35 billion over six deals after the market close on Thursday.

Danaher Corp. priced an upsized $1.55 billion, or 1.55 million shares, of three-year par of $1,000 series B mandatory convertible preferred stock, Spirit Airlines Inc. sold an upsized $175 million five-year convertible notes, National Vision Holdings Inc. priced $350 million of five-year convertible notes, Inseego Corp. sold $100 million of five-year convertible notes and Huazhu Group Ltd. priced $450 million of six-year convertible notes after the market close on Thursday.

In addition, Stanley Black & Decker, Inc. priced a remarketed $750 million of its par of $1,000 series C cumulative perpetual convertible preferred stock.

The new paper saw mixed performances in the secondary space with some deals contracted, others expanded, and others unchanged.

The high volume of new deal activity is expected to continue.

Companies starved of revenue and in need of liquidity are “taking what they can,” a market source said.

Despite two record-setting weeks for new deal volume, the pipeline remains full, sources said.

“We’ll have a steady flow,” a source said.

Danaher upsizes

Danaher priced an upsized $1.55 billion, or 1.55 million shares, of three-year par of $1,000 series B mandatory convertible preferred stock after the market close on Thursday with a dividend of 5% and a threshold appreciation premium of 22.5%.

Pricing came tighter than talk for a dividend of 5.25% to 5.75% and at the rich end of talk for a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

While the offering was upsized and came tighter than initial price talk, the greenshoe was downsized to $167.5 million, or 167,500 shares.

The initial size of the offering was $1.25 billion with a greenshoe of $187.5 million.

Concurrently with the mandatory convertible preferreds, the company priced an upsized $1.55 billion in a secondary offering of 9,509,203 shares at $163.00 a share.

The mandatory convertible preferred stock traded up on an outright and dollar-neutral basis.

The preferred stock was up to 102 on an outright basis and was expanded about 1 point dollar-neutral in the late afternoon, a source said.

Danaher stock traded to a high of $164.75 and a low of $161.10 before closing the day at $161.43, a decrease of 1.25%.

Spirit Airlines upsizes

Spirit Airlines priced an upsized issue of $175 million of five-year convertible notes after the market close on Thursday at the midpoint of talk with a 4.75% coupon and an initial conversion premium of 27.5%.

Price talk was for a coupon of 4.5% to 5% and an initial conversion premium of 25% to 30%.

The greenshoe was also upsized to $26.25 million.

The initial size of the offering was $150 million with a greenshoe of $22.5 million.

Concurrently with the convertible notes offering, the company priced an upsized secondary offering of 17.5 million shares at $10.00 a share.

The notes struggled on their secondary market debut, dropping below par and contracting dollar-neutral.

“SAVE couldn’t SAVE itself,” a market source said.

The notes were marked at 97.5 bid, 98.5 offered versus a stock price of $10.18 in the late afternoon.

They were contracted about 2.5 points dollar-neutral, a source said.

Spirit Airlines stock traded to a low of $9.95 and a high of $10.69 before closing the day at $10.56, an increase of 0.19%.

Inseego volatile

Inseego sold $100 million of five-year convertible notes after the market close on Thursday at the cheap end of talk with a coupon of 3.25% and an initial conversion premium of 20%.

Price talk was for a coupon of 2.75% to 3.25% and an initial conversion premium of 20% to 25%, according to a market source.

Following the offering, Golden Harbor Ltd. and North Sound Trading LP will exchange an aggregate principal amount of $44.8 million of the company’s 5.5% notes due 2022 for a combination of $32.1 million in cash and $80 million of the new notes.

The notes issued in the exchange will form part of the same series as the 3.25% notes but be subject to certain transfer restrictions.

The notes were volatile on their aftermarket debut.

They traded as low as 97 but bounced back and were changing hands at 100.75 in the late afternoon, a source said.

The majority of trading activity was outright although there was some buying from hedge accounts, a source said.

Inseego stock traded to a low of $10.26 and a high of $11.37 before closing the day at $11.20, an increase of 6.57%.

Huazhu at par

Huazhu Group priced $450 million of six-year convertible notes after the market close on Thursday at the rich end of talk with a coupon of 3% and at the cheap end of talk for an initial conversion premium of 30%.

Price talk was for a coupon of 3% to 3.5% and an initial conversion premium of 30% to 35%, according to a market source.

Proceeds will be used to repurchase the company’s 0.375% convertible notes due 2022.

The 2022 notes become putable on Nov. 2.

The new 3% notes were changing hands at par in the late afternoon.

They were also relatively flat dollar-neutral, a market source said.

While the new notes from the Shanghai-based hotel management company fell flat, holders of the 0.375% notes were happy they were going to get something for them, a source said.

Huazhu stock traded to a low of $31.91 and a high of $33.25 before closing the day at $33.21, an increase of 3.49%.

National Vision trades up

National Vision priced $350 million of five-year convertible notes after the market close on Thursday at the rich end of talk with a coupon of 2.5% and an initial conversion premium of 27.5%.

Price talk was for a coupon of 2.5% to 3% and an initial conversion premium of 22.5% to 27.5%.

The new notes jumped on an outright and dollar-neutral basis in the secondary space.

They traded as high as 103 soon after the opening bell and were changing hands between 103.5 and 104 in the late afternoon.

The notes were up about 1.5 points dollar-neutral, a market source said.

National Vision stock traded to a low of $24.70 and a high of $27.30 before closing the day at $26.41, an increase of 8.02%.

The remarketing

Stanley Black & Decker priced a remarketed $750 million of its par of $1,000 series C cumulative perpetual convertible preferred stock after the market close on Thursday with a dividend of 5%, which will increase to 10% at the May 15, 2023 step-up date.

The series C convertible preferred stock was originally issued on May 17, 2017 with no dividend and a higher conversion price.

The preferreds were also trading up on an outright and dollar-neutral basis.

The securities traded up 2.625 points outright and were up almost 2 points dollar-neutral.

Stanley Black & Decker stock traded to a low of $111.83 and a high of $117.50 before closing the day at $117.33, an increase of 6.64%.

Mentioned in this article:

Danaher Corp. NYSE: DHR

Huazhu Group Ltd. Nasdaq: HTHT

Inseego Corp. Nasdaq: INSG

National Vision Holdings Inc. Nasdaq: EYE

Spirit Airlines Inc. NYSE: SAVE

Stanley Black & Decker, Inc. NYSE: SWK

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