Morning Commentary: Colony Starwood’s new deal trades above par in active dealings; Michelin on tap

By Stephanie N. Rotondo

Seattle, Jan. 5 – A convertible bond trader said the market had the “new issue blues” early Thursday, as all of the focus was on Colony Starwood Homes’ $300 million of 3.5% convertible senior notes due 2022.

The deal came late Wednesday, upsized from $250 million. Initial price talk was for a 3.25% to 3.75% yield with an initial conversion premium of 20% to 25%.

“It’s the only thing trading,” a trader said, seeing the issue in a 100.5 to 100.875 range. “Everybody gets involved in one name” and forgets anything else, he commented.

In the wake of the new deal, the company’s equity (NYSE: SFR) was off 12 cents at $29.38.

Morgan Stanley & Co. LLC ran the books.

Proceeds from the Rule 144A offering will be used to privately repurchase some of the issuer’s 4.5% convertible senior notes due 2017, to repay a portion of borrowings outstanding under its credit facilities, to fund potential acquisitions and for general corporate purposes.

Scottsdale, Ariz.-based Colony Starwood is an owner of single family rental homes.

Meanwhile, the market had another deal to look forward to as Michelin announced plans to sell $400 million of non-dilutive, cash-settled convertible bonds due 2022.

Price talk is for a yield of 0% to 0.4% and a conversion premium of 23% to 28%.

The bonds are expected to price at 98% to 100% of par. Once issued, the dollar-denominated paper will convert to euros.

Proceeds will be used for general corporate purposes.

Michelin is a Clermont-Ferrand, France-based tire manufacturer.

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