Chefs’ Warehouse, Chart Industries convertibles expand on debut; Uniti, NextEra eyed

By Abigail W. Adams

Portland, Me., Dec. 9 – The convertibles primary market closed one of the highest volume weeks of the year with two deals pricing.

Chart Industries Inc. priced an upsized $350 million $50-par depositary shares representing a 1/20th interest in $1,000 par three-year series B mandatory convertible preferred stock and Chefs’ Warehouse Inc. sold $250 million of six-year convertible notes after the market close on Thursday.

The two deals completed a tidal wave of primary market activity with 10 deals totaling $3.535 billion pricing over the past week.

The Dec. 5 week stands out as the busiest week for new deal activity by number of transactions by a large margin.

However, the Dec. 5 week still trails by dollar amount the $3.61 billion that priced over five deals during the Nov. 13 week and the $4.115 billion that priced in three deals during the Sept. 11 week, although the exercise of greenshoes may change the final tally.

Meanwhile, activity in the secondary space slowed on Friday as activity surrounding recent issues subsided.

“I think everyone’s exhausted,” a source said.

Equity indexes closed in the red after wavering between either side of unchanged throughout the session.

The Dow Jones industrial average closed down 305 points, or 0.90%, the S&P 500 index closed down 0.74%, the Nasdaq Composite index closed down 0.70% and the Russell 2000 index closed down 0.95%.

There was $512 million in reported volume about one hour before the market close.

The digestion issues seen during the previous session seemed to subside with new paper from Chefs’ Warehouse and Chart Industries putting in a solid performance in the aftermarket.

“Both of these did well today,” a source said.

However, Uniti Group Inc.’s new 7.5% convertible notes due 2027 and NextEra Energy Partners LP’s 2.5% convertible notes due June 15, 2026 continued to struggle.

Chart in demand

Chart Industries priced an upsized $350 million $50-par depositary shares representing a 1/20th interest in $1,000 par three-year series B mandatory convertible preferred stock after the market close on Thursday with a dividend of 6.75% and a threshold appreciation premium of 20%.

There is an upsized greenshoe of $52.5 million.

Pricing came at the rich end of talk for a dividend of 6.75% to 7.25% and at the midpoint of talk for an initial conversion premium of 17.5% to 22.5%.

The initial size of the offering was $300 million with a greenshoe of $45 million.

The depositary shares were marked at $50.75 bid, $51 offered versus a stock price of $119.75 a little more than one hour into Friday’s session.

They expanded about 0.5 point dollar-neutral, a source said.

Chart’s stock traded to a low of $115.57 and a high of $121.36 before closing the day at $117.19, a decrease of 0.77%.

Chefs’ gains

Chefs’ Warehouse priced $250 million of six-year convertible notes after the market close on Thursday at par at the midpoint of talk with a yield of 2.375% and an initial conversion premium of 30%.

Price talk was for a coupon of 2.125% to 2.625% and an initial conversion premium of 27.5% to 32.5%.

The new paper was strong on debut and was marked at 101 bid, 101.75 offered with stock in the red early in the session, a source said.

The notes were changing hands just shy of 101.5 versus a stock price of $33.64 in the late afternoon.

They were seen up 1.5 to 2 points on hedge, a source said.

There was $17.5 million in reported volume.

Chefs’ stock traded to a low of $32.93 and a high of $34.17 before closing the day at $33.10, a decrease of 2.78%.

The new paper came as a refinancing with the company exchanging $158.4 million in principal of its 1.875% convertible notes due 2024 for $159.8 million in cash and 324,066 shares.

The 1.875% notes appeared to be bought back at 107.78, a source said.

NextEra struggles continue

NextEra’s 2.5% convertible notes due June 15, 2026 continued to struggle in secondary market activity with the notes continuing to trade below their discounted issue price.

The 2.5% notes remained on a 96-handle throughout the session.

They were changing hands at 96.375 versus a stock price of $75.15 in the late afternoon.

The notes were unchanged dollar-neutral after a 0.5 point contraction on Thursday’s secondary market debut.

There was $13 million in reported volume.

NextEra’s stock traded to a low of $74.43 and a high of $76.20 before closing the day at $74.52, a decrease of 1.7%.

The overnight deal struggled during bookbuilding and on their aftermarket debut with the notes pricing at 97, well wide of talk for a discounted offer price of 98 to 98.25, and trading down on an outright and dollar-neutral basis.

The overnight marketing and the digestion issues caused by a deluge of new issuance contributed to their poor performance, sources said.

However, some sources saw the notes as attractive and expected them to bounce as the market recovers.

Uniti unchanged

Uniti’s 7.5% convertible notes due 2027 were unchanged after Thursday’s disastrous secondary market debut.

The notes continued to trade on a 98-handle and were unchanged dollar-neutral after Thursday’s large contraction, a source said.

The notes were trading at 98.75 versus a stock price of $6.07 in the late afternoon.

There was $9 million in reported volume.

Uniti’s stock traded to a high of $6.13 and a low of $5.86 before closing the day at $5.94, a decrease of 0.50%.

The 7.5% notes were described by multiple sources as a “disaster” on their Thursday debut with the notes trading as low as 97 out of the gate and contracting 2.5 to 3 points dollar-neutral.

There were issues with putting the notes up on hedge during bookbuilding, which resulted in weak allocations, a source said.

Mentioned in this article:

Chart Industries Inc. NYSE: GTLS

Chefs’ Warehouse Inc. Nasdaq: CHEF

NextEra Energy Partners LP NYSE: NEP

Uniti Group Inc. Nasdaq: UNIT

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.