Annaly (NLY)
$750m (+115m) sen unsec bought cb coming overnight by CS/MS. Terms: 3yr, 5% up 15%, dvd pctn > 55c per qtr. UOP = to buy mbs portfolio & gcp. Not sure where to begin! Existing 4% ’15 backs out L+500. We’ll use L+400 for this and 15 vol. Taking stk down to $16 for slippage (effective 18.3% premo) = 101.83 We are going to keep this brief. Deal size is too big, no obvious substitution from 4% CB or out of equity (15% up 0%), not cheap enough and has risk overnight. Long only funds who can only express their view through CBs may find this attractive but not obvious for anyone else. AVOID