New convertible issues trade mostly in line; Dycom edges up; NextEra pricing overnight

By Rebecca Melvin

New York, Sept. 10 – U.S. convertibles players had three new issues in the market to trade Thursday, and all performed fairly evenly in active trade, or about in line with moves in their underlying shares, a New York-based sellsider said.

Dycom Industries Inc.’s newly priced 0.75% convertibles traded most positively perhaps, edging up after the Palm Beach Gardens, Fla.-based provider of specialty contracting services priced an upsized $420 million of the six-year senior notes at the midpoint of talked terms.

The new Dycom 0.75% convertibles were seen at about 100.5 bid, 101 offered with the underlying shares around $74.16.

That was not far off where they were trading in the gray market late Wednesday. They were seen at 100.75 to 101 at that time, with the shares about 0.5% higher.

Dycom shares were dragging a little bit; down 37 cents at $74.16 at late morning, but they ended flat, or down a cent, at $74.52.

BroadSoft Inc.’s new 1% convertibles were in line with shares that were off 2.8% on the day after the Gaithersburg, Md.-based provider of internet software and services priced $175 million of the seven-year senior notes at the midpoint of talk.

BroadSoft’s older 1.5% convertibles due 2018, of which a chunk is being taken out with proceeds of the new deal, were higher by about 0.5 point on Thursday, in the vicinity of 104.25, according to Trace data.

Stericycle Inc.’s newly priced 5.25% mandatory convertible preferred stock were also seen in line with the common shares, which gained 1.7% at $138.51 after the Lake Forest, Ill.-based provider of medical waste services priced $700 million of the preferred stock at mixed terms.

The three new deals “did OK on the break,” a New York-based buysider said, referring to early in the day when the new paper becomes available for trading in the secondary market.

The expectation is that more new paper will follow this batch, which marked a change from the drought in issuance seen in the convertibles space during the summer months, the buysider said.

And indeed, after the market close, NextEra Energy Inc. launched an offering of $700 million of convertible equity units. The deal was pricing on an overnight basis via Barclays, Mizuho Securities USA Inc. and Wells Fargo Securities LLC.

Back in established issues, Vivus Inc.’s 4.5% convertible senior notes due 2020 traded at around 68, which was up from about 60 previously and in line with Icahn Enterprises LP’s cash tender offer for the 2020 convertibles.

Hedge players had caused a spike in the underlying shares on news of the deal as they unwound positions or changed deltas on the information, a New York-based trader said.

In the broader markets, equities ended solidly higher, with gains in the vicinity of 0.5% following losses of more than 1% on Wednesday.

The Dow Jones industrial average gained 76.83 points, or 0.5%, to 16,330.40, the S&P 500 stock index gained 10.25 points, or 0.5%, to 1,952.20, and the Nasdaq Composite index added 39.72 points, or 0.8% to 4,796.25.

NextEra launches

Juno Beach, Fla.-based power company NextEra Energy plans to price $700 million of three-year mandatory convertible equity units at $50 par value in a registered, overnight deal via joint bookrunners Barclays, Mizuho Securities and Wells Fargo Securities, according to a syndicate source.

NextEra did a similar deal last year at this time for $500 million, and the units came at a discount of $49 to the $50 par.

The new units are expected to be priced before the market open on Friday and to have a distribution rate of 6.371% and a premium of 20%.

The equity units consist of a contract to purchase NextEra Energy common stock and a 5% beneficial ownership interest in a NextEra Energy Capital Holdings Inc. debenture due Sept. 1, 2020. The debentures will be guaranteed by NextEra Energy Holdings’ parent company, NextEra Energy Inc.

The purchase contract obligates holders to purchase from NextEra a certain number of shares no later than Sept. 1, 2018.

Mentioned in this article:

BroadSoft Inc. Nasdaq: BSFT

Dycom Industries Inc. NYSE: DY

NextEra Energy Inc. NYSE: NEE

Stericycle Inc. Nasdaq: SRCL

Vivus Inc. Nasdaq: VVUS

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