Starwood convertible notes in focus, contract on debut; Ventas, Welltower below par

By Abigail W. Adams

Portland, Me., June 23 – It was a quiet day in the convertible secondary space on Friday with the exception of one name – Starwood Property Trust Inc.

Starwood priced $350 million of four-year convertible notes after the market close on Thursday, bringing the tally of new issuance for the holiday-truncated June 19 week to $840 million which priced over three deals.

There may be some scattered issuance in the week ahead as companies greenlight backlogged offerings ahead of earnings season blackouts.

But sources expect the real wave of issuance to occur in mid-to-late July as companies exit their blackout periods and market players exit the wait-and-see mode they have operated in for much of the first half of 2023.

Starwood’s new paper hit the secondary space as selling intensified in equities as markets grappled with the reality that additional rate hikes may be in store.

The Dow Jones industrial average closed Friday down 219 points, or 0.65%, the S&P 500 index closed down 0.77%, the Nasdaq Composite index closed down 1.01% and the Russell 2000 index closed down 1.44%.

Starwood’s new paper dominated activity in the secondary space, accounting for almost one-quarter of the $437 million in reported volume about one hour before the market close.

The new notes struggled on their secondary market debut and traded down on an outright and dollar-neutral basis.

It was a soft day for the secondary space with investment-grade issues yielding to selling pressure as markets began to price in a higher Fed terminal rate than previously anticipated.

Ventas Realty, LP’s 3.75% exchangeable notes due 2026 (Baa1/BBB+) and Welltower Inc.’s 2.75% convertible notes due 2028 (Baa1/BBB+) both dropped below par in active trade.

Starwood struggles

Starwood priced $350 million of four-year convertible notes after the market close on Thursday at par with a coupon of 6.75% and an initial conversion premium of 12.5%.

Pricing came at the cheap end of talk for a coupon of 6.25% to 6.75% and an initial conversion premium of 12.5% to 17.5%.

The new paper was off to a rough start in secondary market activity.

The notes traded below par out of the gate and sank as low as 98.75 in early trade.

However, the notes recouped some outright losses as the company’s stock gained steam as the session progressed.

The notes were changing hands at 99.375 versus a stock price of $18.45 in the late afternoon.

There was $90 million in reported volume.

Starwood stock opened the day in the red, popped into positive territory midway through the session but was dragged back to negative territory by the close.

Stock traded to a high of $18.70 and a low of $18.18 before closing the day at $18.43, a decrease of 0.11%.

Below par

Ventas’ 3.75% exchangeable notes due 2026 and Welltower’s 2.75% convertible notes due 2028 were the subjects of some selling pressure on Friday with both issues closing the day below par.

Ventas’ 3.75% notes shaved off 0.25 point outright.

They were changing hands at 99.75 versus a stock price of $44.41 in the late afternoon, according to a market source.

There was $12 million in reported volume.

Ventas’ stock traded to a high of $45.26 and a low of $44.34 before closing the day at $44.47, a decrease of 0.045%.

Welltower’s 2.75% convertible notes due 2028 were down 0.5 point outright.

They traded down to 99.5 in the late afternoon.

There was $20 million in reported volume.

Welltower’s stock traded to a high of $78.54 and a low of $75.86 before closing the day at $76.28, a decrease of 2.78%.

Mentioned in this article:

Starwood Property Trust Inc. NYSE: STWD

Ventas Inc. NYSE: VTR

Welltower Inc. NYSE: WELL

© 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.