Resource Capital plans new issue; Heritage a no-show; BioMarin’s recent deal remains in play

By Stephanie N. Rotondo

Seattle, Aug. 10 – Yet another new issue was added to the convertible bond market calendar on Thursday.

Resource Capital Corp. announced plans to sell $125 million of convertible senior notes due 2022 via Credit Suisse Securities (USA) LLC.

The debt is non-callable, convertible prior to maturity and putable in the event of a fundamental change.

Ahead of pricing, the company’s stock was not faring well, falling 36 cents, or 3.27%, to $10.65.

The New York-based real estate investment trust intends to use proceeds from the offering to repurchase a portion of its 6% convertible notes due 2018 and its 8% convertible notes due 2020.

The deal had not priced as of 5:45 p.m. ET.

Neither had Heritage Insurance Holdings Inc.’s proposed $125 million of 20-year convertible notes hit the market.

That deal was announced on Wednesday in connection with news the company was buying out NBIC Holdings Inc.

Price talk is for a yield of 5.375% to 5.875% and an initial conversion premium of 30% to 35%, a market source reported.

Citigroup Global Markets Inc. is the bookrunner.

As the market waited for the deal to arrive, Heritage’s stock dropped $2.05, or 15.40%, to $11.26.

As for the week’s other new issues, BioMarin Pharmaceutical Inc.’s 0.599% convertible notes due 2024 – a $450 million deal that priced late Monday with a 40% initial conversion premium – remained active.

However, the bonds – which priced at a discount – were tracking the underlying equity lower.

A trader saw the convertibles trading with a 96 handle in early dealings. That compared to levels in a 97.25 to 97.75 range previously.

The deal came at 98.

In the company’s older issues, the 1.5% convertible notes due 2020 were pegged at 113.5, which compared to 115.5 previously.

As for the stock, it was off $3.20, or 3.76%, at $81.96.

BofA Merrill Lynch led the deal, with J.P. Morgan Securities LLC and Goldman Sachs & Co. acting as joint bookrunners.

The terms of the deal were deemed a bit odd, given the strange coupon, the fact that it priced at a discount and that it came with an initial conversion premium of 40%. After Tuesday’s session, one trader opined that it was a bought deal, thus the awkward terms.

Priceline remains weak

Priceline Group Inc.’s convertible debt continued to be actively traded following the company’s earnings release late Tuesday.

The 0.35% convertible notes due 2020 closed in a 146 to 146.75 context, down from levels around 148.5 on Wednesday. The 0.9% convertible notes due 2021 slipped about half a point to 115 bid, 115.5 offered.

Priceline’s shares meantime declined $57.18, or 3.0%, to $1,849.62.

The online travel company’s second-quarter results were in line to better than expectations. However, guidance for the current quarter failed to excite investors.

For the second quarter, Priceline reported adjusted income of $15.14 per share on revenue of $3 billion.

Analysts polled by Zacks Investment Research had expected adjusted EPS of $14.27 on revenue of $3 billion.

For the third quarter, Priceline wasn’t as optimistic, forecasting adjusted EPS of $31.70 to $33.40.

Polls from Zacks indicated expectations of $34.42 a share.

Mentioned in this article:

BioMarin Pharmaceutical Inc. Nasdaq: BMRN

Heritage Insurance Holdings Inc. NYSE: HRTG

Priceline Group Inc. Nasdaq: PCLN

Resource Capital Corp. NYSE: RSO

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