Morning Commentary: ConMed convertible notes offering eyed; Microchip Technology active

By Abigail W. Adams

Portland, Me., Jan. 24 – With the year starting off lightly for new issuance, all eyes were on a new convertible bond deal set to price after the market close.

ConMed Corp. plans to price $275 million of five-year convertible notes after the market close on Thursday with price talk for a coupon of 2.875% to 3.375% and an initial conversion premium of 22.5% to 27.5%.

Underwriters are marketing the deal with assumptions of 400 basis points over Libor and a 25% vol., according to a market source.

Using those assumptions, the deal modeled 2.5 points cheap at the midpoint of talk, one source said.

ConMed is a repeat issuer of convertible notes and a solid company, sources said.

While companies in the health care sector are known for their cash burn, ConMed has positive cash flow and solid EBITDA, a market source said.

Underwriters were being conservative with the credit spread, a source opined, which was most likely due to the market conditions in the fourth quarter.

The credit spread could easily be tightened to 350 bps over Libor, which would make the deal about 3.25 points cheap at the midpoint of talk, the source said.

Meanwhile, it was another strong day for the tech sector in the secondary space with earnings beats from three large semiconductor companies buoying the overall space.

Microchip Technology Inc.’s 1.625% convertible notes due 2025 were active and making gains on an outright basis alongside stock.

The 1.625% notes rose 6.5 points outright to 153 in active trading early in the session. More than $6 million of the bonds had changed hands about one hour into Thursday’s session.

Microchip stock traded up to $78.34, an increase of 5.31%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.