Morning Commentary: CenterPoint Energy hits the market; Cheniere Energy notes active

By Abigail W. Adams

Portland, Me., Sept. 26 – New mandatory convertible preferreds hit the market on Wednesday, occupying the focus of the secondary space.

CenterPoint Energy Inc. priced an upsized $850 million of three-year series B mandatory convertible preferred stock prior to the market open.

The deal was heard to be in demand during bookbuilding and was volatile in secondary trading.

Trading volume was light outside of the new paper. However, Cheniere Energy Inc.’s 4.25% convertible notes due 2045 were active with a large seller in the market.

CenterPoint prices

CenterPoint Energy priced an upsized $850 million of three-year series B mandatory convertible preferred stock prior to the market open on Wednesday at the midpoint of talk with a dividend of 7% and a threshold appreciation premium of 20%.

Price talk was for a dividend of 6.75% to 7.25% and a threshold appreciation premium of 17.5% to 22.5%, according to a market source.

The greenshoe was also upsized to $127.5 million. The initial size of the deal had been for $750 million with a greenshoe of $112.5 million.

The offering consists of 17 million $50-par depositary shares representing a 1/20th interest in the series B convertible preferred stock.

The deal was part of a large capital raise to fund the energy delivery company’s acquisition of Vectren Corp.

The mandatory convertible preferred stock priced concurrently with an upsized offering of $1.6 billion, or 60,550,459 shares, of common stock, which priced at $27.25 per share.

The depositary shares were active after breaking for trade with more than 1 million of the shares changing hands.

They were trading north of $51.00 soon after the opening bell and were trading at $50.25 shortly before 11 a.m. ET.

“They’re trading off the common and the common priced nice and cheap,” a market source said.

Cheniere Energy active

Trading of convertible bonds was light with CenterPoint Energy’s mandatory convertible preferreds the focus of the space.

However, Cheniere Energy’s 4.25% convertible notes due 2045, which are not normally seen on the tape, were active and trading above their issue price early in Wednesday’s session.

The notes were seen up about 1 point on an outright basis with trades between 80 and 80.5.

There was a large seller in the market with several small buyers, a market source said. The notes are pretty busted with a high conversion premium, the source said.

However, they have been on the rise in 2018 alongside Cheniere Energy’s stock and the broader oil and gas sector.

Cheniere stock was up about 2% early Wednesday to $69.95.

Cheniere priced a $625 million issue of the 4.25% convertible notes at an issue price of 80 in 2015.

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