$800m (+80m) sen unsec cb coming tonight from DB. Terms (A) 400m 5y, 1.75-2.25% up 25-30% (B) 400m, 7y, 2.5-3% up 25-30%. UOP = redeem 7.75% str8/repay $200m loan/note. $3.4B renewable energy co w/a semi biz which may potentially be spun out. Stk = 2.9x ytd. Pari/callable 7.75% w/3y exp life = OAS L+471 b4 announcement.
PF Cash = 575m
Debt = 800m
LTM EBITDA = 160m
FCF = -800m
Lev = 5x
We’d assume L+600/L+675. ADV = 6.7m, 01/16 calls = 63 iv bid w/all hist/vol >50%. You know our drill by now; duration mistmatch/neg gamma w/-ve credit convexity = cap vol @35% for 5/7y
Theo = 103.7, 104.2
L/only demand will lean towards A over B