Morning Commentary: Bloomin’ Brands, Norwegian Cruise on tap; Chewy prices

By Abigail W. Adams

Portland, Me., May 5 – The convertibles primary market continued to roll out new deals at a rapid pace with issuers attempting to price deals while they can, sources said.

Bloomin’ Brands Inc. plans to price $200 million of five-year convertible notes and NCL Corp. Ltd., a subsidiary of Norwegian Cruise Line Holdings Ltd., plans to sell $650 million four-year exchangeable notes after the market close on Tuesday.

The offerings looked cheap with attractive terms. However, for Norwegian Cruise Line, the offering was rescue financing, sources said.

Meanwhile, 2020 Mandatory Exchangeable Trust priced the first mandatory convertible, which is exchangeable for Chewy Inc. stock, since February.

The new paper jumped on its market debut.

Bloomin’ Brands

Bloomin’ Brands plans to price $200 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 4.5% to 5% and an initial conversion premium of 25% to 30%, according to a market source.

Norwegian Cruise Line

NCL Corp., a subsidiary of Norwegian Cruise Line Holdings plans to price $650 million of four-year exchangeable notes after the market close on Monday with price talk for a coupon of 5.75% to 6.25% and an initial exchange premium of 20% to 25%, according to a market source.

The notes are exchangeable for series A preference shares of NCL Corp. which will be automatically exchangeable into Norwegian Cruise Line common shares.

Concurrently with the convertible notes offering, the company is also pricing a $600 million offering of senior secured notes due 2024 and a $350 million secondary offering.

A market source pegged assumptions at 2,000 basis points over Libor and a 45% vol., which modeled about 3.89 points cheap at the midpoint of talk.

“Any company with a ‘going concern’ is going to be 1,000 bps+,” the source said.

In a preliminary earnings release, the cruise line operator announced that its ability to continue was a going concern and that it did not have enough liquidity to meet its obligations over the next 12 months.

Chewy’s exchangeables

2020 Mandatory Exchangeable Trust, a newly organized subsidiary of PetSmart Inc., priced $600 million par of $1,000 mandatory three-year exchangeable trust securities after the market close on Monday with a dividend of 6.5% and a threshold appreciation premium of 20%, according to a market source.

Pricing came at the midpoint of talk for a yield of 6.25% to 6.75% and a threshold appreciation premium of 17.5% to 22.5%.

The offering was the first mandatory convertible since early March.

The securities jumped in the aftermarket.

They were marked at 103.25 bid, 103.75 offered early in the session, according to a market source.

Chewy stock was $41.06, an increase of 4.66%, shortly before 11 a.m. ET.

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