Assurant mandatory convertibles hit market; Guidewire, Deutsche Bank, Etsy on tap

By Abigail W. Adams

Portland, Me., March 8 – New paper emerged in the convertibles primary market prior to the market open on Thursday, with two additional deals set to price after the market close.

Assurant Inc.’s newly priced 6.5% series D mandatory convertible preferred stock closed Thursday up after briefly dropping below par in high-volume trading on their market debut.

Assurant priced $250 million of $100-par series D mandatory convertible preferred stock prior to the market open Thursday with a dividend of 6.5% and an initial conversion premium of 20%.

Pricing came at the midpoint of talk for a dividend of 6.25% to 6.75% and an initial conversion premium of 17.5% to 22.5%. The deal looked to be 2.5-points cheap at the midpoint of talk, a market source said.

Guidewire Software Inc. plans to price $300 million of seven-year convertible notes after the market close Thursday with price talk for a coupon of 1.25% to 1.75% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

The deal is an interesting one and will probably do well, although the seven years until maturity is a drawback, a market source said.

Deutsche Bank AG, London Branch plans to price $300 million of five-year cash-settled equity-linked notes tied to Voya Financial, Inc. stock after the market close on Thursday with price talk for a coupon of 0.5% to 1% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

This is the second deal of cash-settled equity-linked notes tied to Voya Financial to price in recent months.

On Jan. 31, JPMorgan Chase Financial Co. LLC priced five-year cash-settled convertible notes linked to Voya Financial stock with a coupon of 0.25% and an initial conversion premium of 32.5%. JPMorgan’s 0.25% notes dropped about 4 points outright on Thursday after Deutsche Bank’s deal was announced.

In an overnight deal, Etsy Inc. plans to price $300 million in five-year convertible notes prior to the market open on Friday.

The overnight bought deal carries a fixed coupon of 0% and fixed initial conversion premium of 37.5% with price talk for an issue price of 98.5 to 99.

Goldman Sachs & Co., Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC are the joint bookrunners for the Rule 144A deal, which carries a greenshoe of $45 million.

Meanwhile, in existing issuances, Cobalt International Energy, Inc.’s 3.125% and 2.625% convertible notes continued to trade in the single digits as the bankrupt company’s disclosure hearing took place.

The notes dropped more than 25 points on Wednesday after disappointing results from the auction of the Houston-based petroleum exploration and production company’s assets were announced.

PRA Group Inc.’s 3.5% convertible notes due 2023 were active on Thursday as the Norfolk, Va.-based debt buyer’s stock experienced active trading.

Assurant hits the market

Assurant’s new 6.5% mandatory convertible preferred stock hit the market on Thursday after pricing prior to market open.

The series D mandatory convertible preferred stock freed to trade in the OTC markets Thursday with a temporary ticker of “AIZZP.”

More than 1 million shares of the convertible preferreds were in play during Thursday’s session. The convertible preferreds traded to a high of $100.90 and a low of $99.827 before closing the day at $100.6.

Assurant’s common stock closed Thursday at $88.36, a decrease of 0.81%.

Morgan Stanley, JPMorgan and Wells Fargo Securities, LLC were the joint bookrunners for the registered deal, which carries a greenshoe of $37.5 million.

The convertible preferreds will be listed for trade on the New York Stock Exchange under the ticker “AIZP.”

Deutsche’s deal

Another offering of cash-settled equity-linked notes tied to Voya Financial stock is set to price after the market close Thursday with Deutsche Bank as the issuer.

Price talk is for a coupon of 0.5% to 1% and an initial conversion premium of 27.5% to 32.5%, according to a market source.

This is the second deal of cash-settled equity-linked notes tied to Voya Financial to price in recent months.

On Jan. 31, JPMorgan Chase Financial priced five-year cash-settled convertible notes linked to Voya Financial stock with a coupon of 0.25% and an initial conversion premium of 32.5%.

Pricing came at the middle of talk for a coupon of 0% to 0.5% and at the cheap end of talk for an initial conversion premium of 32.5% to 37.5%.

JPMorgan’s equity-linked notes initially struggled alongside the broader markets and spent the first half of February below par.

The 0.25% notes due 2023 regained their footing and solidified around 104 for the first week of March. However, JPMorgan’s 0.25% notes dropped about 4 points on an outright basis to trade just above par during Thursday’s session.

Voya Financial stock was down to $50.91, a decrease of 1.51%, early in Thursday’s session.

Cobalt in focus

Cobalt’s 3.125% and 2.625% convertible notes remained in focus on Thursday as the bankrupt company’s disclosure statement hearing took place. Both notes solidified around 3.5 after dropping more than 25 points on Wednesday after auction results were announced.

The total bids for Cobalt’s remaining assets netted $577.9 million. The convertible notes were trading in the 11 to 12 range in the run up to Cobalt’s bankruptcy but jumped to trade in the low 30s in December after a $500 million settlement for Cobalt’s interests off the coast of Angola.

Cobalt’s prime assets were in the Gulf of Mexico and there was hope Cobalt’s convertible note holders would benefit from the bankruptcy. With the auction results out, the optimism dissipated.

PRA active

PRA Group’s 3.5% convertible notes due 2023 were active on Thursday as the company’s stock broke out of its 52-week range in high-volume trading.

The convertible notes gained about 1 point outright to trade up to 110 during Thursday’s session. PRA stock closed Thursday at $39.75, an increase of 0.89%.

PRA stock appeared primed on Thursday to break its 52-week high of $40.15. Stock traded up to $40.25 but lost momentum by market close. Share volume for PRA stock was 1,908,157 versus the 50-day average daily volume of 375,800.

PRA’s convertible notes and stock have steadily climbed since the company released its fourth-quarter and year-end earnings reports on Feb. 27. SunTrust Banks recently raised PRA’s earnings per share estimates for the first quarter to 33 cents from 26 cents.

Mentioned in this article:

Assurant Inc. NYSE: AIZ

Cobalt International Energy, Inc. OTC: CIEIQ

Etsy, Inc. Nasdaq: ETSY

Guidewire Software Inc. NYSE: GWRE

PRA Group Inc. Nasdaq: PRAA

Voya Financial, Inc. NYSE: VOYA

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