Morning Commentary: Brookdale Senior Living convertible notes eyed as equities sell off

By Abigail W. Adams

Portland, Me., Sept. 28 – The convertibles primary market had one deal on deck on a brutal day for equities.

Brookdale Senior Living Inc. plans to price $200 million of five-year convertible notes after the market close on Tuesday with price talk for a coupon of 2% to 2.5% and an initial conversion premium of 30% to 35%.

The deal was heard to be in the market with assumptions of 600 basis points over Libor and a 38% vol., according to a market source.

Using those assumptions, the deal looked about 3 points cheap at the midpoint of talk.

The deal was in the market on a brutal day for equities with growth stocks the hardest hit as 10-year Treasury yields solidified above 1.5% and the debt ceiling debate reached a deadlock in Congress.

The Dow Jones industrial average was down 444 points, or 1.28%, the S&P 500 index was down 1.79%, the Nasdaq Composite was down 2.56% and the Russell 2000 index was down 1.34%.

There was decent volume in the secondary space with $120 million on the tape a little over one hour into Tuesday’s session.

However, few names saw concentrated trading activity with the activity more the result of end of quarter cleanup than the broad sell-off in equities.

“When it’s the whole market like this, people tend to wait to make a move,” a source said.

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