All about converts

$100m (+15m) sen unsec cb coming tonight from ML/BARC/JPM. Terms 4yr, 3-3.5% up 37.5-42.5%, full pctns. Concurrent $250m 6yr str8. UOP = repay 6.5/8.625% str8. Illiquid 5.85% 17 OAS ~576bp, 5.875% 16 OAS ~460bp, 5yr CDS ~525, we’ll use L+500. Small 685 mkt cap, ADV = 760k, means we’ll discount vol to 25% & use 50bp brw. Theo: 99.9/101.4/102.9. If you think we should be using higher vol assumption then 28 vol/50bp brw=104.6 on cheaps. It’s the only way we could make it work for a hedger (monetizing close to 30 vol on a 775k ADV is difficult), Counter argument = small deal, may be some equity & o/r interest but optics are not great, model fairish which does not offset optics. Not for us. If play, wish upon istar comes cheap.