Recent convertible bond issues in focus; Atlas Air tops trading activity; Stanley units list

By Stephanie N. Rotondo

Seattle, May 19 – A convertible bond trader said the market was quiet on Friday, though he added that there was still a focus on the week’s new issues.

“At least guys are making money off the new issues,” he said.

In particular, Atlas Air Worldwide Holdings Inc.’s $260 million of 1.875% convertible notes due 2024 were moving around, making up about a third of the volume as of mid-morning, according to the trader.

“They are printing all over the place because a lot of these guys have [paper] left over from yesterday,” he said.

“It’s all about Atlas,” he added. “It’s a decent premium. There is much shorter paper out there with much larger premiums.

“[Atlas] passes the beauty test,” he quipped.

By the bell, the new convertibles were seen trading in a 104.125 to 104.625 context versus a stock price of $49.00.

Earlier in the session, the issue was quoted at 102.75 bid, 103.25 offered against a stock price of $47.90.

For its part, the equity was up over 4% in early trading, eventually closing up $1.50, or 3.26%, at $47.55.

The deal came Thursday morning, upsized from $250 million and with an initial conversion premium of 32.5%.

Morgan Stanley & Co. LLC, BNP Paribas Securities Corp. and Citigroup Global Markets Inc. ran the books.

Meanwhile, RealPage Inc.’s $300 million of 1.5% convertible notes due 2022 were not quite as busy as the Atlas deal, but the bonds continued to trade over par.

A trader pegged the paper at 102.5 bid, 103 offered.

The underlying shares were initially up more than 1% in early dealings but closed only 20 cents higher at $33.70.

The Rule 144A deal came late Wednesday with an initial conversion premium of 27.5%. Both the yield and conversion premium were at the cheap end of price talk.

Morgan Stanley and BofA Merrill Lynch were the joint bookrunners.

As for last week’s new issues, Stanley Black & Decker Inc.’s $675 million of 5.375% equity units due 2020 began trading on the New York Stock Exchange under the ticker symbol “SWP.”

The units ended the day at $103.25, up from $103.00 at the open.

The deal priced May 11, coming upsized from $650 million and with a 17.5% initial conversion premium.

The coupon was below the 5.5% to 6% talk while the conversion premium was in the middle of the 15% to 20% talk.

Citigroup, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and Wells Fargo Securities LLC were the joint bookrunners.

Each $100-par unit is made up of a three-year forward contract to purchase common stock and one share of 0% series C convertible perpetual preferred stock.

Also, Becton, Dickinson & Co.’s $2,475,000,000 of 6.125% series A mandatory convertible preferred stock (NYSE: BDXA) – another deal priced on May 11, coming with an initial conversion premium of 20% – remained actively traded, with nearly 689,000 shares exchanged.

The convertible preferreds rose 20 cents to close at $52.37.

Initially, $2.25 billion of the mandatory convertibles were sold – along with $2.25 billion of common stock – and the next day, the company said its $225 million greenshoe had been fully exercised.

Price talk on the convertible preferreds was 6% to 6.5% with an initial conversion premium of 17.5% to 22.5%.

Citigroup, J.P Morgan Securities LLC, Morgan Stanley, MUFG, BNP Paribas, Barclays and Wells Fargo ran the books.

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