Bloom Energy convertibles on tap; primary pick-up expected; Carnival notes skyrocket

By Abigail W. Adams

Portland, Me., Aug. 6 – The convertibles primary market broke its more than week-long silence on Thursday with one new offering on deck.

Bloom Energy Corp. plans to price $135 million of five-year convertible notes after the market close.

The deal, which is the latest to be marketed as a green convertible note, looked cheap based on underwriters’ assumptions, sources said.

While the small offering is expected to be the only new deal of the week, a build-up in the calendar is anticipated for the Aug. 10 week.

Boeing Co. recently filed a shelf registration, which included convertible notes, a source said.

With earnings season mostly in the rearview and some clarity regarding the next stimulus bill expected shortly, new deal activity is expected to resume soon, a source said.

Meanwhile, Carnival Corp.’s 5.75% convertible notes due 2023 skyrocketed in active trading on Thursday after the company announced it was repurchasing nearly half of the outstanding amount.

Bloom Energy seen cheap

Bloom Energy plans to price $135 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 2.5% to 3% and an initial conversion premium of 20% to 25%.

The deal was heard to be marketed with assumptions of 850 basis points over Libor and a 45% vol.

Using those assumptions, the deal looked 8.43 points cheap at the midpoint of talk, sources said.

While the deal looked cheap, it “probably should be,” a source said.

The clean energy company has never turned a profit.

One source felt the credit spread used by underwriters was tight and pegged assumptions at 1,200 bps over Libor and a 45% vol., which modeled 2.7 points cheap at the midpoint of talk.

While the 1,200 bps credit spread may have been a little aggressive, the 2.7 points of cheapness was more fitting pricing for the market.

Bloom Energy also is a “weird company that could go south quickly,” a source said.

The company generates electricity using sand.

While the company has some big, well-known customers, such as Google, the technology is not refined enough to market on the mom and pop retail level, the source said.

Green convertibles

Bloom Energy is the latest company to market its convertible notes offering as a green deal.

Other convertible issues that have been marketed as green in recent months include Plug Power Inc.’s 3.75% convertible notes due 2025, Livent Corp.’s 4.125% convertible notes due 2025, Maxeon Solar Technologies Pte. Ltd.’s 6.5% convertible notes due 2025 and Atlantica Sustainable Infrastructure Jersey Ltd.’s 4% convertible notes due 2025.

“I don’t get it,” a market source said.

While green convertible note offerings are a growing trend, there’s not that much that differentiates them from other convertible notes.

While Plug Power’s 3.75% convertible notes are an illiquid issue that rarely trades, the notes topped double par on Thursday following the hydrogen fuel cell manufacturer’s earnings report.

The 3.75% convertible notes traded as high as 222.625 early Thursday.

Plug stock traded to a high of $11.48 and a low of $10.11 before closing the day at $10.73, an increase of 15.01%.

The company reported a loss per share of 3 cents versus analyst expectations for a loss per share of 9 cents.

Revenue was $68.1 million versus expectations for revenue of $57.44 million.

Carnival in focus

Carnival’s 5.75% convertible notes due 2023 were in focus on Thursday with the notes skyrocketing after the cruise line operator announced it was repurchasing nearly half of the outstanding amount of the convertible notes.

Carnival announced that it was repurchasing $885,589,000 of the notes with proceeds from a public offering of 99,185,968 shares.

The shares were sold at $14.02 a share to holders of the 5.75% notes, according to a company news release.

The 5.75% notes traded as high as 154 in intraday activity with stock down between 3% and 5%.

They traded up 8 points dollar-neutral, a source said.

Carnival stock traded to a high of $14.02 and a low of $13.30 before closing the day at $13.78, a decrease of 1.71%.

The repurchase reduces the outstanding amount of the notes to $1.126 billion, slashing the cruise ship operator’s debt load.

The repurchase was announced shortly after the company stated it would not resume operations until November.

Carnival was the first company to price convertible notes after the market meltdown in March.

The cruise line sold $2,012,500,000 of the 5.75% convertible notes in early April.

Mentioned in that article:

Atlantica Sustainable Infrastructure Jersey Ltd. Nasdaq: AY

Bloom Energy Corp. NYSE: BE

Boeing Co. NYSE: BA

Carnival Corp. NYSE: CCL

Livent Corp. NYSE: LTHM

Plug Power Inc. Nasdaq: PLUG

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