All about converts

$200m ($30m) sen unsec cb coming tonight from JPM/BAC. Terms: 6yr, 5.625-6.125% up 15-20%, full pctns. UOP=reduce sec/debt & port/inv. Existing deal came 01/11 5.75% up 17% (came at 98.5) w/stock 14c lower ($11.7). Key 4 these deals is size (big=greater fool will come, small=not obv index inclusion) $575m ARCC came 5.75% up 17.5% now x/par up 27%, $200m ARCC new=5.125% up 17.5% & now x/par up 19%. We assumed L+500 for BBB AINV 5.75% in Jan, sprds have tightened so we’ll use L+450 here. Existing ARCC’s ~22iv, we assumed 22 vol b4, we’ll stock with it. Theo 101. Mkt still needs paper but as a lot of us learned w/ARCC & ORI repeat issues, BBB rating does not guarantee an o/r squeeze plus inflows aren’t what they were. Size w/get done. Push for mids or better