By Abigail W. Adams
Portland, Me., Dec. 14 – Bristow Group Inc.’s newly priced 4.5% convertible notes due 2023 made large gains on their secondary market debut. The notes were off to a bold start at 103.5 bid, 104 offer shortly after market open but lost strength to trade at 102.5 later in the afternoon, according to a market source.
Bristow’s 4.5% notes and Teva Pharmaceutical Industries Ltd.’s 0.25% convertible notes due 2026 dominated the market during Thursday’s session, accounting for $94.74 million of the $327.605 million trading hands by late afternoon.
Teva’s struggling 0.25% convertible notes due 2026 made small gains as the notes underlying equity shot up after chief executive officer Kare Schultz delved into the details of the company’s restructuring plan.
Cobalt International Energy Inc.’s Chapter 11 bankruptcy filing came as no surprise to holders of the company’s 2.625% convertible notes due 2019 and 3.125% convertible notes due 2021.
The filling was “not unexpected,” with the company in the 30-day grace period after missing coupon payments on both the 2.625% and 3.125% notes, a market source said.
Bristow takes off
Bristow’s newly priced 4.5% convertible notes due 2023 with an initial conversion premium of 25% were in high demand on their secondary market debut, making large gains out of the gate.
The notes were at 103.5 bid, 104 offer early in Thursday’s session but dropped to 102.5 later in the afternoon, according to market sources.
The Houston-based global industrial aviation services provider priced $125 million in convertible notes late Wednesday evening within talk for a coupon of 4.25% to 4.75% and an initial conversion premium of 22.5% to 27.5%.
Credit Suisse Securities LLC, Barclays Capital Inc., and BofA Merrill Lynch are joint bookrunners for the registered sale, which carries a greenshoe of $18.75 million.
The deal comes with a call spread and warrant transactions with a strike price of $20.02, representing a 60% initial conversion premium from the company’s perspective, according to a company release.
Bristow stock was down to $12.09 at market close, a decrease of 3.44%.
Teva helped by restructuring
Teva’s struggling 0.25% convertible notes due 2026 got a boost during Thursday’s session as investors responded positively to the company’s restructuring plans.
The notes climbed to 88 in early trading Thursday after previously trading in a range of 85 to 86. Teva stock also jumped 14.04% to $17.905 in early trades. The notes lost some strength throughout the day dipping into the 87 range in the afternoon.
The notes ended the day at 87.625, according to Trace data. Teva stock also lost some steam after its meteoric rise in the morning and ended the day at $17.3, an increase of 10.19%.
“The story’s exactly the same,” a market source said, of Teva’s restructuring plan. “The results are exactly the same.” There is always room for large cap companies to cut and sell off assets, increasing their valuation.
Teva announced it would cut its cost base by $3 billion by the end of 2019, lay off 25% of its work force, and suspend dividends on its ordinary shares and American Depository Shares.
The company will review paying dividends on its mandatory convertible preferred shares on a quarterly basis, as is the current practice, according to a company release.
Teva’s 7% mandatory convertible preferred shares due 2018 “have gotten killed this year,” a market source said. The preferreds lost over 70% of their value as Teva’s stock collapsed.
As for Teva’s 0.25% convertible notes, “it’s going to get better but not fabulously better,” a market source said. “It’s still a 0.25% piece of paper.”
With Teva losing its investment-grade status, “these bonds for a lot of holders lose their purpose.”
Cobalt’s pay off
Cobalt’s filing of Chapter 11 bankruptcy did not surprise market sources with many anticipating the move. Cobalt’s 2.65% notes due 2019 and 3.125% convertible notes due 2021 “have been bleeding for some time,” a market source said.
Both notes were trading in the 11 to 12 range during Thursday’s session, a typical price for the bonds, a market source said.
“There was no change since it was widely expected,” the source said.
The Houston-based petroleum exploration and production company’s stock was delisted from the NYSE at market close Wednesday for failing to maintain a market capitalization of at least $15 million.
Cobalt stock at Wednesday’s close was $0.38 and the market capitalization was $11.25 million.
The company “has definitely been under a decent amount of pressure,” a market source said.
Cobalt listed assets of $35 million and liabilities of $2.84 billion in its filing, Prospect News reported.
Cobalt missed the coupon payment for its 2.65% convertible notes on Dec. 1. The company also missed the coupon payment on its 3.125% notes on Nov. 15.
Wells Fargo Bank, NA, as trustee for the company’s 2.625% convertible senior notes due 2019, is the largest unsecured creditor with a claim of $801,171,133.25 and the second largest creditor as trustee for Cobalt’s 3.125% convertible senior notes due 2024 with a claim of $627,880,485.59, Prospect News reported.
The trustee or noteholders with at least 25% of the outstanding principal had a put option on the notes if Cobalt failed to make its coupon payments within the 30 day grace period after the missed coupon payments.
But any efforts to enforce default-related rights are automatically stayed under the Bankruptcy Code, Cobalt said in a company release.
Companies mentioned:
| Bristow Group Inc.: | NYSE: BRS
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| Teva Pharmaceutical Industries Ltd.: | NYSE: TEVA
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| Cobalt International Energy Inc.: | NYSE: CIE
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