Seagate, Advanced Energy, Corporate Office expand on debut; Marathon Digital explodes

By Abigail W. Adams

Portland, Me., Sept. 8 – The convertibles primary market capped one of the busiest weeks of the year with $2.75 billion pricing.

Vishay Intertechnology Inc. priced an upsized $650 million of seven-year convertible notes (BB+); Advanced Energy Industries Inc. priced $500 million of five-year convertible notes; Seagate HDD Cayman sold $1.3 billion of five-year notes exchangeable for Seagate Technology Holdings plc shares; and Corporate Office Properties Trust priced $300 million of five-year exchangeable notes post-close on Thursday.

Thursday marked the busiest day of 2023 for new deal activity with the holiday truncated week the busiest week of 2023 by number of transactions and second busiest by dollar amount.

The new deal tally for the Sept. 5 week currently stands at $4.395 billion, which priced over seven deals.

The weekly tally is second only to the Feb. 19 week when $5.49 billion priced over four deals, although the exercise of greenshoes promises to lift the week to the busiest of the year by dollar amount as well.

The active pace of issuance is expected to continue with refinancings and tight credit spreads driving issuers to the market.

“The pipeline should be pretty robust,” a source said.

While deals had been pricing tight and underperforming in the secondary space, pricing is beginning to cheapen with the deals to clear the market on Thursday falling at the midpoint or wide end of talk.

The new paper hit the secondary space on a relatively flat day for equities with indexes either side of unchanged.

The Dow Jones industrial average closed Friday up 76 points, or 0.22%, the S&P 500 index closed up 0.14%, the Nasdaq Composite index closed up 0.09% and the Russell 2000 index closed down 0.23%.

There was $740 million in reported volume in the late afternoon with new paper dominating the tape.

New paper from Advanced Energy, Seagate, and Corporate Office Properties were putting in strong aftermarket debuts with the cheaper pricing supporting their secondary market performance.

However, Vishay underperformed with the notes falling below par although they saw a nominal dollar-neutral expansion.

While the majority of deals to price in Thursday’s onslaught were putting in strong performances in the aftermarket, Marathon Digital Holdings, Inc.’s 1% convertible notes due 2026 were the largest gainers in the space.

The 1% notes exploded in heavy volume after the company entered into privately negotiated transactions to exchange a portion of the notes for shares.

Vishay below par

Vishay priced an upsized $650 million of seven-year convertible notes (BB+) after the market close on Thursday at par with a coupon of 2.25% and an initial conversion premium of 20%.

Pricing came in line with talk for a fixed coupon of 2.25% and at the cheap end of talk for an initial conversion premium of 20% to 25%.

The greenshoe was also upsized to $100 million.

The initial size of the offering was $600 million with a greenshoe of $90 million.

The new paper was the underperformer of Thursday’s deals although it still saw nominal dollar-neutral gains.

The new 2.25% notes traded as high as 101 early in the session but came in to trade at 100.5 with stock largely flat about one hour after the opening bell.

The notes dropped to a 99-handle as stock moved further into negative territory and were seen trading at 99.375 versus a stock price of $24.75 in the late afternoon.

The notes expanded about 0.25 to 0.5 point dollar-neutral, sources said.

There was $87 million in reported volume.

Vishay’s stock traded to a high of $25.44 and a low of $24.52 before closing at $24.57, off 2.23%.

While Vishay’s new paper underperformed, the deal came as a refinancing.

The company entered into privately negotiated transactions to repurchase $370.2 million in principal of its 2.25% convertible notes due 2025 for $388.8 million in cash.

The kiss was in the buyback, a source said, with holders that participated making 2.5 points on the exchange.

Seagate expands

Seagate priced $1.3 billion of five-year exchangeable notes after the market close on Thursday at par at the midpoint of talk with a coupon of 3.5% and an initial exchange premium of 30%.

Price talk was for a coupon of 3.25% to 3.75% and an initial exchange premium of 27.5% to 32.5%.

The notes were putting in a strong performance as stock rebounded from a 10% drop the previous session.

The 3.5% notes were seen at 102.5 early in the session.

They continued to trade on a 102-handle as the session progressed and were seen changing hands at 102.125 versus a stock price of $64.71 in the late afternoon, a source said.

They expanded 1.5 points to 1.75 points on a dollar-neutral, or hedged, basis, a source said.

There was $144 million in reported volume.

Seagate’s stock traded to a low of $63.41 and a high of $65.39 before closing at $65.37, an increase of 3.04%.

Corporate Office trades up

Corporate Office Properties Trust priced $300 million of five-year exchangeable notes after the market close on Thursday at the cheap end of talk with a coupon of 5.25% and an initial exchange premium of 22.5%.

Price talk was for a coupon of 4.75% to 5.25% and an initial exchange premium of 22.5% to 27.5%.

The notes performed surprisingly well given the carnage in the REIT sector, especially in commercial real estate, sources said.

The notes traded up to 102 early in the session.

They were seen at 101.75 versus a stock price of $25.36 in the late afternoon.

The notes expanded about 1.5 points dollar-neutral, a source said.

Corporate Office’s stock traded to a high of $25.42 and a low of $24.50 before closing at $25.39, up 3.89%.

Advanced Energy strong

Advanced Energy sold $500 million of five-year convertible notes after the market close on Thursday at par at the midpoint of talk with a coupon of 2.5% and an initial conversion premium of 30%.

Price talk was for a coupon of 2.25% to 2.75% and an initial conversion premium of 27.5% to 32.5%.

The new paper was the best performer out of Thursday’s deals, a source said.

The notes were trading in the 102.125 to 102.375 context early in the session.

They came in on an outright basis as stock turned negative as the session progressed. However, they maintained a strong dollar-neutral expansion.

The notes were seen changing hands at 100.875 versus a stock price of $104.13 in the late afternoon. They expanded 2.25 to 2.5 points dollar-neutral, a source said.

Advanced Energy’s stock traded to a low of $102.92 and a high of $107.71 before closing at $104.11, a decrease of 1.54%.

Marathon Digital’s exchange

Marathon Digital’s 1% convertible notes due 2026 soared double digits after the company announced a privately negotiated exchange.

The company announced pre-open that it had entered into a privately negotiated transactions to exchange $417 million in principal of the notes for 26.2 million newly issued shares.

Holders that participated saw a 13-point expansion from the exchange, a source said.

The 1% notes were changing hands at 72.375 in the late afternoon.

They maintained a 10-point expansion in secondary trading post-exchange, a source said.

Marathon Digital’s stock traded to a low of $10.43 and a high of $11.90 before closing at $10.91, a decrease of 11.73%.

Mentioned in this article:

Advanced Energy Industries Inc. Nasdaq: AEIS

Corporate Office Properties Trust NYSE: OFC

Marathon Digital Holdings Inc. Nasdaq: MARA

Seagate Technology Holdings plc Nasdaq: STX

Vishay Intertechnology Inc. NYSE: VSH

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