CenterPoint Energy convertibles on tap; Norwegian Cruise Line sinks; Wayfair active

By Abigail W. Adams

Portland, Me., Aug. 1 – The convertibles primary market broke its silence on Tuesday with a long-awaited new deal on deck.

CenterPoint Energy Inc. plans to price $900 million of three-year convertible notes after the market close on Tuesday.

The deal was met with limited enthusiasm with the offering more low vol., short-duration paper from an investment-grade utility company.

However, the deal still played to solid demand with books closing in the early afternoon.

Meanwhile, it was a soft day in the convertibles secondary space with the equity rally waning and accounts making room for new paper.

The Dow Jones industrial average closed Tuesday up 71 points, or 0.20%, the S&P 500 index closed down 0.27%, the Nasdaq Composite index closed down 0.43% and the Russell 2000 index closed down 0.46%.

There was $63 million in reported volume about one hour into the session and $357 million on the tape about one hour before the market close.

NCL Corp. Ltd.’s exchangeable notes for Norwegian Cruise Line Holdings Ltd.’s stock were the name of the day on Tuesday with the notes tumbling on an outright and dollar-neutral basis following earnings.

Wayfair Inc.’s convertible notes were active as the e-commerce company stares down earnings later in the week.

CenterPoint eyed

CenterPoint Energy plans to price $900 million of three-year convertible notes after the market close on Tuesday with price talk for a coupon of 3.875% to 4.375% and an initial conversion premium of 25% to 30%.

The deal was heard to be in the market with assumptions of a 100 basis point credit spread and an 18% vol.

Using those assumptions, the deal looked about 1 point cheap at the midpoint of talk, sources said.

Sources did not express much enthusiasm for the first new deal to hit the market in more than one month with the offering more low vol., short-duration paper from an investment-grade utility.

“It doesn’t look brilliant,” a source said. “People are getting saturated with deals like this.”

However, the deal was heard to have played to solid demand with books closing in the early afternoon.

Norwegian takes a hit

NCL Corp.’s exchangeable notes were taking a hit on Tuesday as Norwegian Cruise Line’s stock dropped double digits post-earnings.

The 2.5% exchangeable notes was the most active tranche with the notes falling 5 points outright with stock off as much as 15% in intraday activity.

They were changing hands at 91.25 versus a stock price of $19.23 in the late afternoon.

The contracted about 1.125 points dollar-neutral on the move down, a source said.

There was $16 million in reported volume.

The 1.125% exchangeable notes fell 6 points outright.

They were changing hands at 87.5 versus a stock price of $19.19 in the late afternoon.

The contracted about 1.25 point dollar-neutral.

There was $7 million in reported volume.

However, while the 5.375% exchangeable notes tumbled 10.5 points outright, they were largely flat on hedge.

The 5.375% notes were changing hands at 128 versus a stock price of $18.95 in the late afternoon.

There was $10 million in reported volume.

Norwegian’s stock traded to a low of $18.38 and a high of $20.11 before closing at $19.41, a decrease of 12.05%.

While Norwegian posted solid second-quarter results, stock dropped on weak third-quarter guidance in contrast to its cruise industry peers.

Norwegian posted earnings per share of 30 cents versus analyst expectations for earnings per share of 26 cents.

Revenue was $2.21 billion versus analyst expectations for revenue of $2.17 billion.

However, Norwegian forecast earnings per share of 70 cents for the third-quarter versus analyst expectations for earnings per share of 79 cents.

Wayfair active

Wayfair’s convertible notes were active on Tuesday with the home decor e-commerce company set to report earnings later in the week although with little movement in price.

The 1% convertible notes due 2026 were trading at 86.875 versus a stock price of $74.91 in the late afternoon, according to a market source.

There was $11 million in reported volume.

The 3.5% convertible notes due 2028 were trading at 182.5 versus a stock price of $75.36.

There was $10 million in reported volume.

Wayfair’s stock traded to a low of $73.20 and a high of $76.81 before closing at $75.90, down 2.53%.

The company will report earnings on Thursday.

Mentioned in this article:

CenterPoint Energy Inc. NYSE: CNP

Norwegian Cruise Line Holdings Ltd. NYSE: NCLH

Wayfair Inc. NYSE: W

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