Morning Commentary: Market eyes Post Holdings convertible preferred stock offering

By Abigail W. Adams

Portland, Me., Nov. 19 – Trading volume in the secondary space was light at the start of the truncated holiday week, but the primary market continued to roll out new deals.

Post Holdings, Inc. plans to price $400 million of series D cumulative perpetual convertible preferred stock after the market close on Monday with price talk for a dividend of 4% to 4.5% and an initial conversion premium of 25% to 30%, according to a market source.

Using assumptions of 475 basis points over Libor and 24% vol., the deal models about 3.79 points cheap, a market source said.

Post Holdings has two outstanding series of perpetual convertible preferred stock, 3.75% series B convertible preferred stock and 2.5% convertible preferred stock.

“I imagine anyone who owns the old (ones) will sell that and buy the new,” a market source said.

Gogo Inc. priced an upsized $215 million offering of four-year convertible notes after the market close on Friday with a coupon of 6% and a 20% initial conversion premium.

The deal was increased from a planned $200 million and came at the cheap end of talk for a coupon of 5.5% to 6% and an initial conversion premium of 20% to 25%.

The new paper was not seen trading early in Monday’s session.

In the broader convertibles market, there was about $50 million on the tape a little more than one hour into Monday’s session. However, there was no clear focus to the trading activity, a market source said.

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