Energizer on tap; Western Digital, Citrix convertibles active; Gannett up on takeover bid

By Abigail W. Adams

Portland, Me., Jan. 14 – While equity markets were soft and the U.S. federal government shutdown dragged on with no end in sight, the convertibles primary market launched one new deal.

Energizer Holdings, Inc. plans to price $187.5 million of par of $100 three-year mandatory convertible preferred stock after the market close on Tuesday with price talk for a dividend of 7.25% to 7.75% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

J.P. Morgan Securities LLC, Barclays and Citigroup Global Markets Inc. are the lead bookrunners for the registered offering, which carries a greenshoe of $28,125,000. BofA Merrill Lynch, MUFG, and Evercore ISI are joint bookrunners.

The deal comes with a call spread and will price concurrently with a $187.5 million common stock offering.

While the partial government shutdown has ensnared the Securities and Exchange Commission, seasoned issuers need only a press release to be declared effective, a market source said.

Meanwhile, the secondary space was quiet with little notable activity, a market source said. There was $47 million in trading volume early in the session and $263 million on the tape late in the afternoon.

Western Digital Corp.’s 1.5% convertible notes due 2024 were among the most actively traded in the secondary space with the notes seeing a slight expansion dollar-neutral as stock tanked after an analyst downgrade.

Citrix Systems Inc.’s 0.5% convertible notes due April 15, 2019 also saw high-volume activity on Monday with large sellers in the market as the maturity for the notes approaches.

Gannett Co. Inc.’s 4.75% convertible notes due 2024 were making gains on both an outright and dollar-neutral basis after news broke about a hostile takeover bid for the media holding company.

Atlassian Corp.’s 0.625% convertible notes due 2023 were also active in the run-up to the software company’s second-quarter earnings report on Thursday.

Western Digital active

Western Digital’s 1.5% convertible notes due 2024 saw a fresh round of high-volume trading activity on Monday after stock tanked after an analyst downgrade.

The 1.5% notes were trading largely flat on an outright basis but were expanded slightly dollar-neutral, sources said. The notes were changing hands around 83.5, a market source said.

The notes were expanded about 0.125 point dollar-neutral, a market source said. The notes trade on about a 20% delta.

More than $13 million of the bonds were on the tape by the late afternoon.

Western Digital stock took a hit on Monday, trading as low as $36.16 before paring its losses to close the day at $38.05, a decrease of 4.95%.

Stock was trading down after analysts at Evercore ISI downgraded the company to “underperform” due to competitive pressure that has yet to be priced into the stock.

Analysts at Evercore ISI also said the stock’s dividend is at risk of getting cut.

Citrix matures

Citrix’s 0.5% convertible notes due April 15, 2019 also saw high-volume activity during Monday’s session. The notes were changing hands just north of 147.

With more than $21 million of the bonds on the tape by the late afternoon, they were the most active in the secondary space.

Citrix stock closed Monday at $105.99, a decrease of 0.14%.

The activity surrounding the notes was largely end of life trades with the notes’ maturity quickly approaching, a market source said.

There have been large outright sellers in the market, the source said.

The notes also saw high-volume activity for much of last week.

Gannett’s takeover bid

Gannett’s 4.75% convertible notes due 2024 jumped outright after news broke about a hostile takeover bid for the media holding company.

The 4.75% notes rose 11.5 points outright to trade up to 114.41 on an outright basis, according to a market source.

The notes were expanded about 0.5 point dollar-neutral. More than $10 million of the bonds were on the tape by the late afternoon.

Gannett stock shot up to $11.82, an increase of 21.23%.

The notes have takeover protection with a make-whole.

The conversion rate adjustment would add an extra 20 points to parity, a market source said.

The notes stand to gain 1 to 1.75 points dollar-neutral on a take-out, another source said. However, the notes were trading due to the stock move and not the potential takeout, the source said.

“It’s not a definite deal,” the source said.

Gannett received a $1.36 billion, or $12.00 a share, unsolicited takeover bid from MNG Enterprises Inc., which Gannett’s board of directors has said it is carefully reviewing, Bloomberg reported.

Gannett priced a $201.25 million issue of the 4.75% convertible notes in April 2018.

Atlassian’s earnings

Atlassian’s 0.625% convertible notes due 2023 saw a fresh round of trading activity on Monday with the software company slated to report second-quarter earnings prior to the market open on Thursday.

The 0.625% notes were largely wrapped around 132.375 in active trading.

Atlassian stock was off during Monday’s session, trading to a low of $92.851 but closing the day at $93.60, a decrease of 2.14%.

Mentioned in this article:

Atlassian Corp. Nasdaq: TEAM

Citrix Systems Inc. Nasdaq: CTXS

Energizer Holdings, Inc. NYSE: ENR

Gannett Co. Inc. NYSE: GCI

Western Digital Corp. Nasdaq: WDC

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